States' sales tax mop-up rises on fuel price hike

States have seen a windfall of nearly Rs 3,000 crore as a result of the increase in the prices of petrol and diesel.

The government had increased the price of petrol by Rs 4 per litre and that of diesel by Rs 2 per litre in the first week of June.

According to figures available with the petroleum ministry, the increase in sales tax collection on account of the fuel price hike will fetch the states an additional revenue of Rs 1,092 crore on petrol and Rs 1,853 crore on diesel, in 2006-07.

While eight states have decided to forgo a portion of this increase, about 17 including Rajasthan, Madhya Pradesh, Uttar Pradesh, and Gujarat have refused to provide any relief to consumers in terms of reduction in sales tax.

Delhi has forgone the entire Rs 63 crore of additional income that it would have earned.

States that have not touched their sales tax have argued that an increase in fuel prices will lead to greater state expenditure, and hence higher outgo towards subsidising sectors like power and some industries.

Petroleum Minister Murli Deora has been exhorting the states to share the burden of price increase with the consumers.

He has already written to chief secretaries of all states advocating a cut in state levies, as the increase in prices will bring in extra revenue for them. Sales tax imposed in various states varies from 20 per cent to 30 per cent for petrol, while it is in the range of 8.8 per cent to 37 per cent for diesel.

The eight states and Union territories that have reduced sales tax, including Maharashtra, Andhra Pradesh, Tamil Nadu, and Delhi, have done so in varying degrees. As a result, the retail prices of petrol in these states have been reduced in the range of Rs 0.39 "" Rs 1.17 a litre.