Saturday, December 23, 2006

Govt tanks up for a cheaper fuel regime

New Delhi: This could be a huge bonanza for consumers if the Centre manages to pull it off. It is examining a proposal to bring petrol, diesel and aviation turbine fuel under the central sales tax (CST) regime, which will attract just 4% tax. Since states currently levy 18-33% sales tax on petrol, the move, if successful, will sharply reduce fuel price.However, states are expected to oppose any such move.
Yet, the proposal has two things in its favour. Firstly, the political leadership would like to see fuel prices sharply down ahead of upcoming state elections. Secondly, the experience in removing state-level sales tax on cooking gas and bringing it under CST has been smooth.
The government plans to facilitate this change through Section 14 of the Central Sales Tax Act, by notifying auto fuels as “declared goods”. In consequence, under Section 15 of the same Act, states would have to tax these products at a sales tax levy of 4%, as opposed to the current sales tax rates. Tax incidence on petroleum products in India is among the highest in the world. Almost 45% of the retail price of petrol comprises the tax component at various levels.
23/12/06 Rajeev Jayaswal & Soma Banerjee/Economic Times
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