With states having no option to tinker with the Goods and Services Tax (GST), Chief Minister H D Kumaraswamy has resorted to increasing sales tax on petrol and diesel by two percentage points.
Both petrol and diesel have been kept out of the GST regime. The present sales tax on petrol and diesel at 30% and 19% respectively is already one of the highest in the country. Kumaraswamy, in the coalition government’s maiden budget, has increased the rate to 32% and 21%. This will result in petrol prices increasing by Rs 1.14 per litre and diesel by Rs 1.12 per litre.
The government is estimated to get Rs 1,120 crore at current rates by increasing the sales tax on fuel. The levies are ‘ad valoreum’ - the tax is based on the value of the product. Thus, when the price of petrol is revised by oil marketing companies, sales tax gets revised upwards automatically.
In the previous budget presented in February this year, then chief minister Siddaramaiah had not touched sales tax on fuel, but claimed credit for passing on reduction in fuel prices (Rs 3.1 litre on petrol and Rs 2.68 per litre on diesel), following the abolition of entry tax from July 1 last year. Siddaramaiah had also provided relief to lakhs of small traders by enhancing the turnover limit for levying professional tax. While the relief will continue, Kumaraswamy has stopped short of announcing any new sops in commercial taxes.
On the reform and administrative side, Kumaraswamy has proposed a Karasamadhana scheme to waive 100% of penalty and interest on payment of full tax on or before October 30, 2018 to enable the trade and industry to clear their central sales tax liabilities. He has proposed to enhance the period prescribed for disposal of appeal by the Karnataka Appellate Tribunal from the existing one to three years from the date of stay order.