The state governments follow an ad valorem tax structure on fuel prices, which means that whenever there is an increase in the rates of fuel, the tax collection also moves up proportionately.
Our revenue will grow by Rs 80 to 100 crore due to the increase in petroleum product prices, Punjab Excise and Taxation commissioner A Venu Prasad said on Tuesday.
Similarly, Haryana is also expecting a Rs 100 crore jump in revenue. Revenue from petroleum products is expected to increase by Rs 100-105 crore on an annual basis because of the hike in petroleum rates, Haryana Excise and Taxation Commissioner Anurag Rastogi said. Punjab and Haryana earn annual revenue of Rs 1,500 crore and Rs 2,100 crore, respectively, from petrol, diesel, cooking gas and other fuel sales. Punjab imposes 27.5% VAT, plus a 10% surcharge, on petrol. It also levies Rs 1 for every litre of the fuel as infrastructure cess and 1 per cent octroi. The VAT rate on diesel stands at 8.8 per cent, on top of which a 10% surcharge and 2% octroi is imposed.
In contrast, Haryana levies 20% VAT plus a 5% surcharge on petrol and 8.8% VAT plus a 5% surcharge on diesel. The high rate of VAT in Punjab has resulted in petrol prices going up by Rs 4-6 per litre in comparison to its neighbours like Haryana and Himachal Pradesh (24% VAT).
Meanwhile, the Punjab Petroleum Dealers Association has threatened to hold a one-day strike on July 13, demanding abolition of octroi and a reduction in the VAT rate on petrol in order to sustain their businesses.