Wednesday, Mar 27, 2002
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By Sujay Mehdudia
The reluctance to tax CNG, now a major fuel of the Capital, and the declining revenue from petrol and diesel has already caused a loss of around Rs. 100 crores to the exchequer. In addition to this, the sales tax collections are expected to fall short by around Rs. 140 crores and excise collections around Rs. 100 crores. Also, the reduction in the sale price of petrol and diesel is also likely to have a negative impact on the collections. This coupled with continued deduction in the Central Plan Assistance by the Planning Commission, a phenomenon witnessed during the past two years, could make the going difficult for the Sheila Dikshit Government.
Interestingly, the consumption of diesel, a major revenue earner for the Government, has gone down since the transportation system in the Capital was forced to shift to CNG. The increased use of CNG by commercial and private vehicles has seen a sharp rise in the consumption of CNG which at present does not invite any sales tax. But with financial constraints bound to increase and revenue commitments suffering badly, the Government has to exercise the option of imposing a sales tax on CNG.
Although the tax could be nominal in nature, it could be imposed with a view to cover up the losses to wipe out the sales tax deficit. In fact, a nominal imposition of around five to eight per cent sales tax is likely to hike the price of CNG by around 80 paise. The Government cannot ignore the fact that CNG is becoming the main fuel and it should be taxed at the distribution point to maintain fiscal discipline and compensate for the loss incurred from low consumption of diesel. ''The argument that it is a green fuel and eco-friendly simply cannot overlook the fact that it is a major money spinner for the Government which also needs money to tackle anti-pollution programmes. The Government has no other option but to impose sales tax on CNG,'' remarked a senior official.
The Government will have to take this decision this year itself and cannot wait for the next budget as next time it is going to be a ''please all budget'' due to the Assembly elections scheduled for 2003. On the other hand, the excise collections have not been very encouraging this year. They have maintained a 17 per cent growth which is not enough to meet the budgetary target of Rs. 700 crores. Till the end of February, the excise collections stood at around Rs. 550 crores. The sales tax target was fixed at Rs. 3,800 crores but the collections are expected to fall short by around Rs. 150 crores. Of this, the loss on account of decline in revenue from the fuel sector, particularly CNG, has been put at around Rs. 100 crores.
It is understood that the Finance Department had prepared a proposal to impose four per cent tax on CNG but the opposition from some environmentalist groups has the Government dithering. The Central Government had in the Union Budget proposed a hike of 90 paise in the CNG price. This strengthens the case of the Delhi Government to impose a nominal sales tax cess on CNG to make up for the loss of revenue. At present, the loss if around Rs. 100 crores but with the increase in consumption anticipated this year round, the loss could well double up if the Government does not exercise the taxation option.
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