Sales tax revenue for states on petroleum products will grow by up to 9 per cnet in FY21 despite the impact of the COVID-19 pandemic, a report said on Thursday. The rise will be primarily driven by a rebound in volumes with the economic recovery after sharp fall in the initial months, benefits of the increase in central and state taxes and also firmness in crude prices, domestic rating agency Crisil said.
The combined monthly volumes of petrol and diesel account for 90 per cent of sales tax collections from petroleum products for states. The sales tax gets computed on the value of fuel after adding the excise duties, which are at an elevated level at present.
The agency said sales tax on petroleum products contributes a 15 per cent to states’ own tax revenues and hence, the expected recovery in collections should offer a breather to state finances, which have been under pressure since the lockdown began.
“There could be a 7-9 per cent on-year rise in sales tax receipts to Rs 1.96 lakh crore, despite an expected 25 per cent fall in collections in the first quarter on-year,” it said in a note.