Delhi sales now going to NCR due to high VAT on fuel, say dealers

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New Delhi | Published: October 23, 2018 6:16:40 AM

Even as Haryana and Uttar Pradesh have recently reduced value-added taxes (VAT) on petrol and diesel, the Delhi government hasn’t; the city state’s stubborn refusal to take a cue from the Centre (which cut excise by Rs 1.5/litre on October 4) is believed to have led to a sudden shift in fuel consumption to the two neighbouring states.

VAT on fuel, NCR,  VAT revenue, DPDA, VAT revenue, NDA government, VAT on dieselAccording to the Delhi Petrol Dealers Association (DPDA), since the VAT reductions were announced by UP and Haryana, Delhi’s diesel consumption declined by over 50% and sale of petrol by a quarter. (Reuters)

Even as Haryana and Uttar Pradesh have recently reduced value-added taxes (VAT) on petrol and diesel, the Delhi government hasn’t; the city state’s stubborn refusal to take a cue from the Centre (which cut excise by Rs 1.5/litre on October 4) is believed to have led to a sudden shift in fuel consumption to the two neighbouring states.

For every litre of petrol that consumers bought from the 18-odd company-owned-company-operated retail fuel outlets in Delhi on Monday (over 380 dealer-operated outlets remained closed as dealers went on a strike, protesting against the higher VAT), the state government got Rs 17.31 through VAT and for diesel, its VAT revenue was Rs 11/litre. In comparison, UP got Rs 14.52/litre from petrol and Rs 8.71/litre from diesel as VAT, and Haryana, Rs 15.10 and Rs 8.96, respectively. Before October 4, the VAT/litre across the three states were at par.

According to the Delhi Petrol Dealers Association (DPDA), since the VAT reductions were announced by UP and Haryana, Delhi’s diesel consumption declined by over 50% and sale of petrol by a quarter. FE could not independently verify these figures: OMCs are yet to come out with the post-VAT cut sales data.

On Monday, petrol was expensive by Rs 2.57 per litre in Delhi compared with adjoining cities of Ghaziabad and Noida in Uttar Pradesh, and Rs 1.50 per litre compared with Gurgaon and Faridabad in Haryana. In terms of diesel, the difference was Rs 2.04 per litre for UP and Rs 1.33 per litre for Haryana. DPDA’s president Nischal Singhania on Monday said people are preferring to get fuel from the neighbouring states over Delhi, resulting in a significant drop in sales volume and if the price disparity continues, operating retail outlets in Delhi will become unsustainable.

“There has been no communication to us from the state government on our demand (for VAT cut),” he said. Though OMCs had written to DPDA asking not to disrupt public utility services, the association still went ahead with the strike. While DPDA’s reason for a cut in VAT can be debated, the fact remains that states have been making a killing in tax collection from auto fuels due to its ad valorem nature. Though many states such as BJP-ruled Maharashtra (only petrol), Gujarat, Uttar Pradesh, Madhya Pradesh, Jharkhand, Chhattisgarh, Tripura and Assam, Haryana and Uttar Pradesh, among others, cut VAT on diesel and petrol by Rs 2.50 per litre after the Centre on October 4 cut the excise duty ? a fixed amount per litre ? by Rs 1.50 per litre of petrol and diesel, and asked OMCs to absorb Rs 1 per litre, many states, including Delhi, did not respond citing that the NDA government hiked the excise on fuels nine times between November 2014 and January 2016 (it decreased these levies once late last year as well) and should reduce the rates by similar amount.

However, it should be noted that while the Centre earns a fixed Rs 13.83 and Rs 17.98 from sale of per litre of diesel and petrol, respectively, sold across the country after the Rs 1.50 per litre cut earlier this month, states on an average levy 29% VAT. In addition, the Centre also devolves 42% of the non-cess excise collected by it to states.

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