Telangana will lose more by Not Reducing Vat on Petrol and Diesel

Hyderabad: The decision of the Telangana government not to reduce the Value Added Tax (VAT) on petrol and diesel will lose more source of revenue as the people particularly in the bordering districts of Jagadamba Gadwal, Narayanpet, Vikarabad, Sanga Reddy, Kamareddy etc and trucks making long distance travels are preferring to buy the Petrol and Diesel in Karnataka over Telangana, as the fuel has become much cheaper in the neighboring state following a cut of Rs. 7 per litre in the prices of both petrol and diesel.

According to the sources of the Consortium of Indian Petroleum Dealers, if the State government chooses not to reduce VAT citing loss of revenue by Rs. 1200 crore for reducing VAT by Re. 1, the state would incur losses of 20 times that amount by not being competitive, as sales would come down locally.

The dealers felt that there was an urgent need for the State government to take early decision in reducing the VAT, failing which, there would be huge loss of revenue on petroleum products to the State.

For petrol, the Telangana state is charging 35.2 per cent as VAT and for diesel it is 27 per cent, after the Centre reduced excise duty, VAT on petrol has automatically come down by Rs. 1.30 and on diesel by Rs. 2.78 per litre.

It may be recalled that during the covid pandemic, the prices of crude oil at the international level was low and consumption was also low, because of it, the Center had kept the excise duty high to rationalize the situation now due to economic recovery, the Centre had decided to reduce the excise duty.  

The Telangana government argument that the Central government should reimburse to state the additional excise duty collected during pandemic will only effect to the common people and there would be severe loss to the State revenue coming from the petroleum product.