Entry tax makes petrol, diesel costliest in state

Entry tax makes petrol, diesel costliest in state
High Levies Don’t Fill Coffers
TIMES NEWS NETWORK

Bangalore: Citizens of Karnataka pay the highest prices for petrol and diesel compared with those in any other part of the country.
The reason: the government burdens the consumer with a 5% entry tax on fuel, something no other southern state has. On top of that, it levies a sales tax — 28% for petrol and 20% for diesel — the highest in the country.
That’s an over 33% tax by the state government on the basic price of petrol, and over 25% on diesel. Every increase in the basic price of fuel means a further increase in the total tax paid on fuel.
So even though the Centre increased the basic price of petrol only by Rs 5, Bangaloreans actually have ended up paying an extra 61 paise. In the case of diesel, it’s not the Centre-imposed Rs 3, but a total of an extra Rs 3.36 that Bangaloreans pay.
But if CM B S Yeddyurappa thinks this high taxation has a beneficial impact on the state’s treasury, he may be wrong. An official of an oilmarketing company says some of the company’s fuel stations in Andhra Pradesh — in areas close to Karnataka — see supplies of 2,000 kilolitres of diesel a month, compared with 400-500 kilolitres supplied by the big fuel stations in Karnataka. “Clearly, transport vehicles prefer to fill up fuel in states like AP, where fuel is much cheaper than in Karnataka.”
In other words, the resources that the state hopes to raise through high taxes are not realised as those high taxes discourage offtake from the state. With some of the neighbouring states now reducing taxes (TN has reduced that on diesel by 2%), the difference in fuel prices between Karnataka and neighbouring states has widened. This will further encourage fuel purchase from those states.
R C Purohit, ex-president, FKCCI, says entry tax should be withdrawn and relief should be given in sales tax. “The government is getting extra resources on account of the hike, which at least it can forgo without any loss of revenue.”
John M Panikar, president, Bangalore Chamber of Industry & Commerce, says the state should cut sales tax to give some relief to people.
BIG TAX BOUNTY
Sales tax realised by Karnataka government from petrol and diesel sale from April 1, 2007 to March 31, 2008: Rs 3,800 crore
Consumption of petrol and diesel during 2007-2008: 72,043 kilo litres and 256,877 kilo litres
Tax expected from petrol and diesel is Rs 28.1 crore per month for 2008-09