Petrol, diesel rates to go up in Karnataka as govt hikes sales tax; falling crude rates impacts state's revenue collection

Bangalore: The Congress-JDS government in Karnataka on 4 January increased tax rates on petrol and diesel to 32 percent and 21 percent respectively, citing adverse impact on the state revenue collection due to continuous fall in the prices of crude oil in international market. Prior to the revision, the tax rates on petrol and diesel were 28.75 percent and 17.73 percent, respectively. The revised rates for petrol and diesel are Rs 70.84 per litre and Rs 64.66 per litre, respectively.

“The revision has been made due to continuous fall in the prices of crude oil in the international market from past two-and-a-half months, which has resulted in the base price of both fuels plummeting substantially, causing an adverse impact on state’s revenue collection,” the chief minister’s office said in a statement.

Despite the revision, the retail price of petrol and diesel in Karnataka are lower compared to neighbouring states, considering the base price of the fuels as on 1 January, 2019,it claimed. [caption id=“attachment_5320661” align=“alignleft” width=“380”]  Representative image. Reuters[/caption] It also said there was additional collection of Rs 1.14 and Rs 1.12 per litre on petrol and diesel, respectively, because of the government increasing the tax rate, from 30 percent to 32 percent and from 19 percent to 21 percent, respectively, from July 15, 2018. However, considering the substantial increase in the base price of petrol and diesel, the government had reduced the incidence of tax on these fuels by Rs 2 per litre from 17 September last year to give relief to the consumers. “Accordingly, the tax rate on petrol and diesel came down from 32 percent to 28.75 percent and from 21 percent to 17. 73 percent, respectively.” With effect from 5 October, 2018, the Union government also reduced the central excise duty on petrol and diesel by Rs 1.5 per litre and also directed Oil Marketing Companies to cut petrol and diesel prices by Rs 1 per litre out of their own margin, the statement added.