The Hindu : Front Page : Share the burden, States urge Centre

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Tuesday, Jun 17, 2008
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Share the burden, States urge Centre

Ashok Dasgupta

“Bear 50 % of revenue loss due to tax cuts on fuel”

NEW DELHI: Opening a new front on the petro-goods pricing issue, the Empowered Committee of State Finance Ministers on Value Added Tax on Monday asked the Centre to share 50 per cent of the Rs. 8,000-crore revenue loss the States would suffer this fiscal on account of tax cuts on fuels.

Talking to journalists, committee chairman and West Bengal Finance Minister Asim Dasgupta said: “Several States, confronted with this unusual situation [arising from the Centre’s move to raise fuel prices], have taken the decision to reduce the sales tax on petrol and diesel and cut the VAT rate on LPG or to provide subsidy…We want 50 per cent of this loss incurred to be shared by [the] Government of India.”

Mr. Dasgupta pointed out that a wrong message was going to the people that the States would always be prepared to take such a hit.

“The States cannot take this beating further. They have limited revenue-raising power and huge developmental responsibilities,” he said.

Unanimous decision

It was the committee’s unanimous decision to ask the Centre to share 50 per cent of the revenue losses of the States.

The States would lose Rs. 8,000 crore owing to the cut in the sales tax on petrol and diesel and VAT on LPG, as also the lower devolution of taxes to them due to the Centre’s move to cut customs and excise duties on petrol and diesel.

While raising the prices of petrol by Rs. 5 a litre, diesel by Rs. 3 and LPG by Rs. 50 a cylinder to bail out the oil marketing companies, the Centre took a hit of Rs. 22,660 crore in revenue by cuts in excise and customs duties on crude and other petroleum products so as to lessen the burden on the consumer.

Mr. Dasgupta said 10 out of the 33 States and Union Territories had reduced the ST on petrol and 15 lowered the levy on diesel.

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