Petrol dealers urge Delhi govt to lower VAT rate on diesel in national capital

In view of the increase in Value-Added Tax (VAT) on diesel in the national capital, fuel dealers in Delhi have now urged the Delhi government to lower the VAT on diesel here, as it is resulting in a heavy loss of sales at petrol pumps, making them unviable to operate.

The Delhi Petrol Dealers Association (DPDA), a body of petrol pump owners, has a membership of about 400 fuel pumps. In a letter, the pump association has said that the Delhi Government had increased Value Added Tax (VAT) on petrol to 30% from 27%, previously on May 5.

Similarly, in the case of diesel, VAT has been almost doubled to 30% from 16.75%.

"This increase in VAT has resulted in a price difference of more than Rs.8/litre in diesel with neighboring states, which is causing a heavy loss of sales and more than 200 petrol pumps have become unviable,” said Mr. Anil Bijlani, President of the Delhi Petrol Dealers Association (DPDA).

The Delhi government had increased VAT on petrol and diesel to 30% and had also introduced a cess of 70% on liquor.

It was said that these measures were required to increase the revenue of the state. Liquor cess was withdrawn on June 10, citing a loss in revenue and smuggling from neighboring states. However, the hike in the VAT rate remained unchanged.

It is to be noted that VAT on petroleum products contribute a huge percentage to the total revenue of the state.

The petrol.pump association has raised the issue of cost-cutting if the measures to tackle the increased VAT rate are not taken by the Delhi government. 

Moreover, the petrol pump owners may also opt to reduce the working hours by operating the petrol pump only during the day, since night operations are very expensive and are not required as no diesel sales are left. "Maybe introduce one weekly off,” said Tanay Gupta, General Secretary of the DPDA.

Proposed VAT

“Diesel price is more than the petrol price only in Delhi, as the rate of VAT on both the products is 30%. Everywhere else in the country, including in the neighboring states, the difference in rates between the two products is still Rs. 6-9 per liter”, the letter mentioned.

It added, “In the neighboring states of Haryana and Uttar Pradesh. there also exists another advantage of a 'fixed VAT rate' in Rs./Litre. DPDA has proposed fixed VAT rates lower than that in neighboring states to the Delhi government, which will bring down the price by more than Rs. 9/liter in diesel and Rs. 3/liter in petrol."

The association has cited data that the migration of Diesel sales to the neighboring states and the smuggling of Diesel into Delhi has led to a massive drop in sales and thus revenue. In June 2020, the sales drop of Diesel in Delhi was (-) 64% in comparison to the national average drop of only (-) 18%. This will result in a loss of revenue of more than Rs. 380 crores per annum due to higher VAT.