Reduction of sales Tax on Petro-Products

December, 17th 2008
International prices of crude oil and petroleum products have remained volatile in the recent past. The Indian basket of crude oil, which averaged $79.25 per bbl during 2007-08 had gone up to $120.91 per barrel in May’08. It touched an all time high of $142.04 on 3.7.2008. In order to deal with huge under-recoveries of OMCs on sale of sensitive petroleum products, the Government had marginally increased the retail selling prices of Petrol, Diesel and Domestic LPG by Rs.5/- per litre, Rs.3/- per litre and Rs. 50/- per 14.2 kg. cylinder respectively with effect from 5.6.2008. In order to cushion the burden of the price hike on Petrol, Diesel and Domestic LPG effected on 5th June 2008, an appeal was made to the State Governments to moderate the State Taxes and to begin with, at least forego the incremental tax on the said increase on Petrol and Diesel prices. Based on this appeal, several State Governments like West Bengal, Bihar, Maharashtra, Gujarat, Uttar Pradesh, Kerala, Goa, Assam and Uttaranchal have reduced Sales Tax on Petrol and Diesel. The State Governments of Tamil Nadu, Haryana and Jharkhand have reduced Sales Tax on Diesel and the Union Territory of Chandigarh has reduced Sales Tax on Petrol. In addition, the State Governments of Maharashtra, Goa, Gujarat, Haryana, Uttaranchal and Uttar Pradesh as well as the Union Territory of Chandigarh have abolished the VAT on Domestic LPG. State Governments of Delhi and Andhra Pradesh have also provided State subsidy on Domestic LPG. This was stated by the Minister of State for Petroleum and Natural Gas Shri Dinsha Patel in a written reply to a question by Shri Rajkumar Dhoot, Member of Parliament in the Rajya Sabha today.