The latest cut in fuel prices in the wake of falling global oil prices is likely to result into a combined revenue loss of around Rs300 crore per annum for Punjab and Haryana.
Despite resorting to raising tax on fuel last month in order to compensate for loss of revenue on account of falling fuel prices, fresh reduction in petrol and diesel prices is further expected to hit revenue mobilisation of both Punjab and Haryana. Petrol and diesel prices were cut by Rs2 per litre each with international oil prices slumping to five-year lows. It was the eighth straight reduction in petrol prices since August and fourth in diesel since October. The new prices were effective from December 15 midnight. "There is going to be a revenue loss of about Rs100-150 crore due to latest reduction in fuel prices," a senior official of Punjab Excise and Taxation department said.
Similarly, Haryana also fears revenue loss of about Rs150 crore on account of reduction in petrol and diesel prices. "It is expected that there will be an impact of Rs13 crore of revenue per month from both petrol and diesel due to cut in recent fuel prices," said an official of Haryana Excise and Taxation department here. Punjab and Haryana have projected total VAT collections to the tune of Rs17,760 crore and Rs19,930 crore, respectively, by end of current fiscal.
With States levying tax on petroleum items as per 'ad valorem' method, any increase or decrease in prices of fuel cause affect in tax mobilisation to the state kitty. However, both states do not have any plan as of now to frame a proposal to further raise VAT on petroleum products to make up the revenue loss on account of reduction in petrol and diesel rates.