Allow VAT credit on petroleum products or reduce the rates ASSOCHAM to Delhi Govt

The legislative move by the Delhi Government to increase the Value Added Tax (VAT) on petroleum products to 30 percent from 20 percent will hit the industrial units in the national capital raising the cost of diesel at least by Rs 5 a litre and making the operations unviable, ASSOCHAM has said in a letter to Chief Minister Mr Arvind Kejriwal.

Fuels in the form of petrol, diesel and kerosene, LPG, CNG, PNG and coal are the items on which no VAT credit is allowed to the manufacturers.  VAT credit is allowed only to licensed dealers of fuel products who purchases fuel in commercial quantities for resale, highlighted The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication addressed to Chief Minister.

The increase in VAT rate on petroleum products will increase the cost of diesel by Rs. 5/- a liter which is used by most of the industries in Delhi to run their boilers and generators for manufacturing use as no other fuel is being allowed by Delhi Pollution Control Committee, whereas other States are using alternative fuel like coal and bio briquettes which is much cheaper than diesel.

“The cost of running with diesel is almost 2.5 times that of coal. This increase of Rs. 5/- a liter will make industries in Delhi unviable as compared to industries in neighboring States,” ASSOCHAM Secretary General Mr D S Rawat said in a letter to the Chief Minister.

He urged the Chief Minister that either VAT credit be allowed to the manufacturing sector on fuel used in boiler and generator for production purposes or VAT should not be increased.

There was a time when the subsidy was given by the Government on diesel to control its prices.  There was justification at that time of not allowing the VAT credit on these products to the industry as fuel was being supplied at subsidized rates.  Now-a-days the price of diesel and other petroleum products is not controlled by the Government and no subsidy is given by the Government on petrol and diesel, noted the ASSOCHAM letter to the CM.