The State government has deferred its decision on slashing the additional ₹4 VAT on petrol and diesel.
The government has asked the revenue officials to “come back with more data” on the prices of petroleum products in the neighbouring States and the implication on the State revenues.
The government is unlikely to slash the price in the near future as it is apparently buying time to decide on the demand to bring down the VAT and additional VAT.
Revenue target
The government has set a target of generating a revenue of ₹10,600 crore on the petroleum products in the 2018-19 fiscal. It may have to forgo the possibility of reaching the target if it cuts down the additional VAT, sources say.
The officials have given a presentation that there is not much difference between the prices of petroleum products in Andhra Pradesh and other States. They argue that the VAT being collected in other States is higher than in Andhra Pradesh.
Chief Minister N. Chandrababu Naidu is learnt to have discussed the levy of additional VAT in A.P. and other States such as Telangana. He has asked the officials to study in detail and make a presentation, official sources say.
PwC report
The government was expected to slash the additional VAT in November last following representations by the petroleum dealers.
It had even appointed the PricewaterhouseCoopers (PwC) as the consultant to study the implications of the reduction in VAT on petroleum products. The PwC had submitted its report six months ago.
“A lot has changed after the PwC presented its report. We need to take stock of the situation afresh,” says a senior official.
After the advent of the Goods and Service Tax (GST), petroleum and liquor are the only sources of direct tax for the State government. A major chunk (18% to 19%) of revenue of the Commercial Taxes Department comes through VAT on petrol and diesel.
“The government will have to forego ₹400 crore to ₹500 crore if the government slashes the fixed charge by a rupee,” he explains.
A.P. Federation of Petroleum Dealers State president R. Gopalakrishna says the government isn’t heeding to repeated appeals to decrease the price of fuel. The federation is planning to meet Mr. Naidu shortly to submit a representation again. The price of fuel has been rising steadily since the introduction of dynamic pricing in June 2017.
Ever since other States have slashed VAT, Finance Minister Yanamala Ramakrishnudu has been arguing that the government needs to take its revenues and financial position into consideration before taking a decision.
“It’s all a political decision. The government is apprised of the facts and figures,” say officials.
