VAT panel decision on petro products on April 26

The empowered committee on value added tax (VAT) will take a final decision on tax treatment of petroleum products by the end of the month.

The move comes in the face of rising fuel costs due to increase in tax rates on petroleum products and severe revenue loss to some states.

States like Delhi and UP will have to face revenue loss from diesel till the VAT panel resolves the issue of floor rate of tax on petroleum products on April 26, state government officials said today.

They added that Delhi may have to take out diesel from the VAT list as Asim Dasgupta, chairman of the empowered committee, made it amply clear that petroleum products will be out of VAT as their prices are not market-determined. "Petroleum products are still out of VAT. There will be no deviation. The reason why petroleum products have been kept out of VAT is that they are not marketable commodities and fall under the administered price mechanism," Dasgupta said.

Delhi has imposed a VAT of 20% on diesel, which is much higher than the earlier sales tax of 12%. Uttar Pradesh also charges 20% sales tax on diesel. In contrast, neighbouring states like Haryana and Punjab have kept it at 12% and 8.8%, respectively.

The empowered committee had earlier decided on a minimum tax rate
of 20% on diesel.

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

A K Walia, finance minister of Delhi, 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% or allow us to violate the floor rate."