Decision on fuel tax soon

The move comes in the face of rising fuel costs owing to the increase in tax rates on petroleum products and a loss of revenue faced by some states.

States like Delhi and Uttar Pradesh will have to face revenue loss from diesel till the VAT panel resolves the floor rate of tax on petroleum products on April 26.

Sources said Delhi might have to take out diesel from the VAT list as empowered committee chairman Asim Dasgupta made it amply clear that petroleum products would be out of the purview of VAT as their prices were not market-determined.

"Petroleum products are still out of the VAT. There will be no deviation. The reason why petroleum products have been kept out of the VAT is that they are not a marketable commodity and fall under the administered price mechanism," Dasgupta said.

Delhi has imposed the VAT on diesel at 20 per cent, which is much higher than the earlier sales tax of 12 per cent. Uttar Pradesh also charges 20 per cent sales tax on diesel.

In contrast, neighbouring states like Haryana and Punjab have kept the rates at 12 per cent and 8.8 per cent, respectively. The empowered committee had earlier decided on a minimum tax rate of 20 per cent on diesel.

The Delhi government has admitted that it has lost revenue by 40-50 per cent during the first 13 days of imposition of the VAT.

Delhi Finance Minister A K Walia said, "We are losing revenue to the neighbouring states. We have asked the empowered committee to ask other states to increase the tax on diesel to 20 per cent or allow us to violate the floor rate system."