Dec 27: The Central and State governments are exploring possibilities towards revising tax rates, considering the huge revenue loss following the sharp decrease of petrol and diesel prices. The international prices of crude oil have fallen to a 52-week-low owing to economic uncertainties and other global factors.
Fuel prices in India hit a new low on Thursday. The public sector oil companies have slashed petrol and diesel prices for the sixth straight day and petrol price in Delhi has recorded the lowest level in 2018. Today petrol price in Delhi has come down to 69.79 per litre in Delhi. Retail price of diesel stands at Rs 63.83 per litre in Delhi.
International oil prices witnessed sharp selling pressure in the last two months and reached close to US$ 50 per barrel due to supply- demand mismatch. In India, prices of petrol and diesel are fully market driven and change on a daily basis. Since rupee has also strengthened considerably against the dollar, the oil companies have got more room to go for a price cut.
The fuel price varies across the country as states levy different value added tax on these products. In September, India had witnessed huge upward movement in petrol and diesel prices owing to higher international prices. At that time, many state governments had cut value added tax on petrol and diesel to cushion the common manâ€™s burden. The Centre had also cut excise duty on fuel in October to contain price escalation. This has caused a revenue loss of Rs 7,000 crore for the Union Government in the remaining fiscal.
â€œSince, the international prices have fallen sharply; the government may consider reinstating earlier tax structure and save close to Rs 5,000 crore. The finance ministry will consult this issue with petroleum department soon. Since the general election is around the corner, this needs a political decision,â€ a source in finance ministry said.
It is believed that if the central government will go for a tax reversal, the state governments that had cut VAT earlier may also look forward to increase the rate to improve their fiscal deficit.