Maharashtra may cut sales tax on petroleum products

Seeks to cushion consumers from rise in petrol costs

Maharashtra is contemplating a cut in sales tax on petroleum products, to cushion the impact of any sharp hike in petrol, diesel and LPG prices on consumers.

The state charges 29 per cent sales tax on petrol "� the highest in the country "� and also levies Re 1 surcharge on every litre of petrol. In case of diesel, sales tax is 31 per cent in addition to a surcharge of Re 1 per litre.

The price of petrol is Rs 49.16 in Mumbai compared with Rs 43.49 in Delhi, Rs 47.49 in Chennai and Rs 46.90 in Kolkata. Similarly, Diesel costs Rs 37.57 per litre in Mumbai, Rs 7.12 higher than its price in Delhi. In Chennai, diesel costs Rs 33.72 per litre and in Kolkata Rs 32.87 per litre.

Sales tax on petroleum products account for inflows of between Rs 4,000 "� 5,000 crore to the state exchequer. Finance minister of state Jayant Patil said, "We are open to the idea but the final decision will be taken only after seeing the actual increase in prices".

A senior official from state finance ministry said, "There were talks about restructuring the sales tax rate in the state when state budget was prepared but talks remained inconclusive."

According to him, the decision will have to be taken at the political level as the petroleum prices are a very sensitive issue.

"Whatever the cut may be, it will be ensured that it doesn't affect existing revenue projections from the sales tax on petroleum product," he clarified.

Another state government official pointed out that if consumers were to be given relief, petroleum products should be brought under the ambit of the VAT regime.

However, the state governments must be compensated for the loss of revenue.