Tamil Nadu govt hints it may not cut VAT on fuel

Chennai: With prices of petrol and diesel touching record highs, the Tamil Nadu government on Monday hinted it may not cut the Value Added Tax (VAT) on these products, saying they form a key part of the state's own tax revenue (SOTR).

Fisheries Minister D Jayakumar said the state extends benefits and sops worth Rs 77,000 crore to various segments, with salary of government employees constituting 70 per cent of its expenditure.

"The own source of income for the state is primarily from petroleum products and liquor meant for human consumption ...these are revenue generating sources," he said.

Both petroleum products and liquor sales in the state are covered under the VAT regime.

"We have to give Rs 77,000 crore worth benefits and sops to many sections.. salary (of government employees) constitutes about 70 percent (expenditure)... when we give like this, where will the money come from?," he asked.

Jayakumar was responding to a question on possible VAT revision by the state government with fuel prices soaring to new heights. Fuel rates touched a record high on Sunday as oil PSUs passed on four weeks of relentless rise in international crude prices to consumers. As of today (May 21), the cost of petrol in Chennai is Rs 79.47 per litre while that of diesel is Rs 71.59.

Meanwhile, AMMK leader TTV Dhinakaran and MNM founder Kamal Haasan expressed concern over the hike in fuel prices. Dhinakaran sought to know why the prices were not hiked till Karnataka assembly elections got over.

"People are facing setback over the dangerous decision of the Centre allowing oil marketing companies to fix rates on a daily basis. But the BJP government only should explain the magic behind the rates not going up during Karnataka elections," he said in a statement.

He said India imposes high taxes on petroleum products and urged both the BJP-led government at the Centre and the ruling AIADMK in Tamil Nadu to cut taxes on petrol and diesel to benefit the common man.

MNM President Kamal Haasan wondered why global trends were being blamed for the hike while there were domestic solutions to address the issue.

"Experts opine they (Central government) can reduce prices if they want... blaming the world (global trends) is not convincing," he told reporters here.

On May 18, Economic Affairs Secretary Subhash Chandra Garg had declined to say if the government would cut excise duty on auto fuel to ease the burden on consumers.

The government was watching the situation developing from oil prices hitting USD 80 a barrel -- the highest since November 2014, and adequate steps will be taken, he had said without elaborating. Asked if the government would cut excise duty on petrol and diesel, he had stated that he has nothing to say on that front.

No sooner had Karnataka polled to elect a new government, state-owned Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) on May 14 ended a hiatus in revising petrol and diesel prices that began on April 25 and reverted to the 11-month old practice of changing rates on a daily basis.