On the back of rising consumption of auto fuels, state governments are likely to see an annual rise of 7-9% in sales tax receipts from petrol and diesel in FY21 to about Rs 1.96 lakh crore, analysts at Crisil Ratings said. The agency noted that the combined monthly volume of petrol and diesel sales has nearly doubled in July from April levels, and if economic activity rebounds to pre-pandemic levels by November, the annual volume decline may be restricted to 11- 12% this fiscal, resulting in higher contribution to the states’ coffers due to higher value added taxes imposed.
The states will also gain from the rise in auto fuel taxes through increased excise duties which will raise the taxable value of petrol and diesel for the levy of state sales tax. “This higher taxable value of the fuel is providing additional sales tax of about Rs 3 per litre to states on weighted average basis,” Ankit Hakhu, director, CRISIL Ratings said. The Central government has hiked excise on transportation fuel by Rs 10 per litre on petrol and Rs 13 per litre on diesel on May 5, after raising taxes by Rs 3 per litre for both petrol and diesel on March 14. Taking a cue from the Centre, the states have also increased the VAT on the transportation fuels.