Petrol and diesel turned dearer in Karnataka last week, but not enough to stop vehicles bound for neighbouring Telangana and Tamil Nadu tanking up in the State.
Triggering a ₹3-3.5 per litre increase was Karnataka’s decision to increase sales tax on the fuels, a move aimed at mopping up additional revenue. Even after the higher levy, difference in per litre price of diesel works out to a little over ₹6.50 and almost ₹5.50 compared with prices in Telangana and Tamil Nadu respectively.
Petrol prices in Tamil Nadu are competitive, while the incentive for vehicles bound for Telangana to purchase in Karnataka is nearly ₹4.50 per litre, according to fuel prices published by oil companies.
Apart from benefiting the State levying comparatively lower tax, the pattern also translates into leakage of revenue for neighbouring States levying higher rates. It is not limited to retail sales as sources in the petroleum trade in Telangana say bulk diesel supplies to consumers, across the State borders, is not uncommon.
‘GST way forward’
Petroleum dealers are for bringing petrol and diesel under Goods and Service Tax (GST) resulting in pricing that will uniform, barring a small variation on account of transportation costs, across the country, Consortium of Indian Petroleum Dealers leader K. Suresh Kumar said. A shift to GST would also allow the trade to benefit from the resultant ITC (input tax credit). A tall order, considering States reluctance to part with the substantial revenues the levy of fuels fetch, a shift to GST is something the Centre prefers.
The impact of the fuel price difference is evident in the sales volume of retail outlets across the borders. Interestingly, Tamil Nadu, Telangana and Karnataka dealers near Andhra Pradesh stand to gain as the latter’s levy is the highest, sources in petroleum trade said.
