Uttar Pradesh - Centre slams state over reduction in
petro VAT
The Centre has slammed the Mayawati government for
laxity in lowering Value Added Tax (VAT) on petroleum
products. The reaction followed the decision taken by
the Central Empowered Group of Ministers (EGoM), who
raised prices of diesel, kerosene and domestic Liquefied
Petroleum Gas (LPG) recently, owing to rising
international oil prices. Justifying the Centre's
compulsion to raise fuel prices, the Union government
suggested that the state government should reduce VAT on
petroleum products instead.
Defending the fuel price hike, Union Coal Minister Sriprakash
Jaiswal said the state government could easily afford a 2% reduction of VAT, in
turn providing residents of the state much-needed relief from spiralling
petroleum product prices. Jaiswal said: "A 2% roll back will not affect the
state coffers in a big way. The public sector oil marketing companies are
bleeding and the government should help them immediately."
In March 2011, with an eye on the forthcoming assembly elections scheduled in
2012, the UP government had announced a rebate in VAT on essential items and
certain farm products, including motorised and non-motorised vehicles for
physically challenged people (down to 4% from 12.5%), and on 10 horse power pump
sets used by farmers, which was also reduced to 4% level.
However, the UP government had ruled out a reduction of VAT on diesel, claiming
that the tax rate in UP was already lower than most other states. In a letter UP
chief minister Mayawati dispatched to Prime Minister Manmohan Singh, she
mentioned that UP had lowered VAT on diesel from 21% to 17.23%, while VAT on LPG
was waived. Maintaining there was no headroom for VAT reduction, the state
government had, instead, urged the Centre to rollback fuel price hikes. A senior
UP government official, said: "The UPA government has taken a decision they know
is hugely unpopular among the masses. Now, they are trying to place the blame
for high prices on state governments. If the Centre alleges the state government
is trying to fleece the local public, the government at the Centre is doing so
at nationwide level.''
The political spat aside, the Petroleum and Natural Gas Regulatory Board (PNGRB)
is also expected to approach the UP government for reduction of taxes levied by
the state on natural gas. The regulatory board has repeatedly advocated
rationalization of state levies on natural gas. Though the Union government
offers tax exemption on CNG consumption, UP continues to charge 23.5% tax. In
comparison, Gujarat and Maharashtra levy 15% tax on CNG, while Haryana imposes
5.25%.
The Central government officials claim consumption patterns will see a spike
should the state government lower the tax regime. Currently, Uttar Pradesh
consumes only 3.5 lakh scm gas per day, significantly lower than Delhi as well
as Gujarat.
