States urge Centre to bear 50% of loss due to tax cuts on fuel

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New Delhi, Jun 16 (UNI) Putting the ball back in the Centre's court, states today asked the UPA government to share 50 per cent of the Rs 8,000 crore revenue loss caused by tax and duty reduction on fuels.

''We want 50 per cent of this loss incurred by states to be shared by Government of India,'' VAT panel Chairman Asim Dasgupta told reporters here after a meeting of the Empowered Committee of state finance ministers on value added tax (VAT).

''Several of the states, confronted with this unusual situation (of the Centre's move to raise prices of petro products), have taken the decision to reduce sales tax on petrol and diesel and cut VAT rate on LPG or to provide subsidy,'' he said.

He added that a wrong message is going to the people as if the states are prepared to take this loss always. ''States cannot take this beating further. They have limited revenue raising power and huge developmental responsibilities,'' he said.

Mr Dasgupta said states would lose at least Rs 8,000 crore due to cut in sales tax on petrol, diesel and on VAT on LPG as well as reduction in devolution to them caused by the Centre's move to cut customs and excise duties on petrol and diesel.

The Centre had announced a price hike of Rs five petrol and Rs three on diesel to bail out oil marketing companies, which are suffering losses due to surging global curde oil prices.

The hike, announced on June 5, saw the LPG prices being raised by Rs 50 a cylinder as well.

Top counter this increase, the Centre had cut excise and customs duty on crude and other petro products, taking a hit of over Rs 22,000 crore.

Prime Minister Manmohan Singh had also asked states to cut their taxes on petro products, which many of them did.

Ten of the total 33 states and Union Territories have cut sales tax on petrol, while 15 reduced sales tax on diesel.

Some states like Delhi has cut only VAT on LPG.

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