After the fuel price hike by the Central government, the onus has clearly shifted to states with both the Congress and the Bhartiya Janta Party (BJP) asking their chief ministers to mitigate the impact of the increase seen as too sharp for the common man. While several of them — across political lines — have cut sales tax rates and even offered subsidies over the last two days, the pressure is now on the empowered committee of state finance ministers to take a call on sacrificing a chunk of state revenues.

The Centre has done its bit by cutting customs and excise duties on crude oil and petroleum products. This is estimated to cost the exchequer Rs 22,660 crore. States are generally reluctant or not ready to cut the sales tax since all states together will lose Rs 6,911 crore as they get 30.5 per cent in the Centre’s total tax receipts. The total sales tax from petroleum products for all states stands at Rs 36,000 crore

According to sources in finance ministry, the empowered committee is scheduled to meet on June 16. With general elections just 11 months away, the committee chaired by Asim Dasgupta, Finance Minister in the CPI(M)-ruled West Bengal, will discuss if sales tax on fuel products — petrol, diesel and aviation turbine fuel (ATF) — can be further pared.

Many states impose cess and entry tax too besides high sales tax on petrol and diesel. Sales tax on petroleum products is among the easiest to collect and comprises 20-25 per cent of revenues for most states. Some states such as West Bengal, Delhi, Maharashtra, Tamil Nadu, Bihar and Orissa have already cut rates in the last two days.

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