With sale of branded or premium
petrol and diesel falling to almost nil due to high duties, a government
appointed expert panel has recommended slashing excise duty to make
them at par with regular fuel. At present, the finance ministry levies
Rs 15.50 per litre excise duty on branded or premium petrol as compared
to Rs 9.20 a litre on regular or unbranded fuel. Similarly, on branded
diesel attracts Rs 5.75 a litre excise duty as opposed to Rs 3.46 a
litre for fuel without a brand name. As a result, branded petrol costs
Rs 80.99 a litre in Delhi while regular petrol is priced at Rs 71.46.
Similarly, premium diesel costs Rs 63.71 per litre while unbranded
diesel is priced at Rs 57.28. The Saumitra Chaudhuri Committee on Auto
Fuel Vision & Policy 2025 said the differential duty rate would not
fulfil the narrow revenue objectives as branded fuel sales have fallen
sharply. "The 'branded' products are premium automotive fuels that
result in improved engine life and better long term mileage and policy
should encourage their use, not discourage it," the panel said in its
report submitted to the Oil Ministry here. Stating that the same
product for the same application is being charged widely different rates
of excise duty, it said the differential duty structure introduced in
2008 has discourage use of branded fuel. "It is urged that the
Department of Revenue make immediate changes in this situation and bring
the duty rates of gasoline (petrol) and diesel on par, irrespective of
whether they are regular or premium, i.e. branded," it said. The rates
of excise duty on gasoline and diesel are fixed rates, not ad valorem.
"The argument can be made that a higher priced product – which premium
fuels indeed are – should be taxed at a higher rate. "This legitimate
concern can be taken care of by imposing a small differential in the
excise duty of 50 paise per litre, which will more or less maintain the
inter se tax proportionality as between regular and premium automotive
fuels, as long as the duty rates remain fixed and do not change to ad
valorem," the report said. The panel also said state VAT on natural
gas/CNG varies widely and is in many cases as high as 15 per cent ad
valorem. The VAT on LPG other than that for domestic use is also
variable and high. It recommended a moderate rate of state VAT (or GST
as and when it rolls out) should be imposed, which will encourage the
use of this environmentally cleaner fuel.
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