Protest against LPG tax increase in MP

While Chief Minister Shivraj Singh Chouhan is preparing to contest election on April 24 from Budhni, his Cabinet colleague Babulal Gaur's department has triggered a state-wide protest by raising entry tax on domestic LPG cylinders from 1 per cent to 9.5 per cent with effect from March 31 through an ordinance.

Various organisations, including the Congress, have threatened to launch a protest against the sudden spurt in LPG prices in the state with effect from the evening of April 8. More than 3,000,000 consumers will be affected by the hike. The oil companies and the state government are shifting the blame from one to the other.

The oil companies have increased prices to Rs 24 per 14.9 kg of domestic LPG cylinder with effect from April 8 to compensate losses, which are as high as Rs 2,500 crore in Indian Oil's case, due to an increase in state entry tax.

Although the state government has said the oil companies are fully responsible for the hike in prices, an IOC official told Business Standard, "Since there is no set-off available on entry tax we have no option left but to increase prices to compensate the losses. The prices will now come down only if the state government rolls back the entry tax or offers a set-off on it."

Earlier the LPG cylinder attracted commercial tax of 14.8 per cent. With the implementation of value added tax (VAT) from April 1, the state government "� following the Central government's guidelines "� reduced it to 4 per cent but increased the entry tax to compensate the revenue losses.

The state government issued a statement on Saturday evening to clarify its stand on the price hike and said the oil companies were responsible.

The statement said LPG fell under declared goods under the Central Sales tax Act 2006 and thus VAT on LPG had been capped at 4 per cent from the earlier commercial tax of 14.8 per cent (including 1 per cent entry tax).

Even after an increase in entry tax from 1 per cent to 9.5 per cent, the tax rate is 13.5 per cent or 1.3 per cent less than the previous 14.8 per cent. Thus there is a loss of Rs 63 crore per annum to the state exchequer. The statement said the oil companies raised prices to clock profit since the tax has been reduced.

The central government, the statement alleged, had reduced the tax to cut subsidy on LPG. All the state governments had protested against this decision last month during a meeting of state finance ministers. The chief minister is learnt to have protested against the decision of the oil companies and plans to write a letter to the prime minister on the issue.