High VAT rates: Rajasthan loses oil sale revenue to neighbouring states

JAIPUR: Despite having one of the largest networks of highways, including being part of the busy Delhi-Mumbai route, the state is losing out on sales of petrol and diesel to neighboring states due to its high VAT rates.

In 2021-22, petrol sales in Rajasthan grew 4.6%, compared to over 10% in the neighboring states such as Gujarat, Punjab, Haryana and Uttar Pradesh.The trend is similar for diesel.
The fuel station dealers in Rajasthan, who are now protesting the high rates by shutting down over 6,700 outlets in the state, said whenever the rates were lower, the sales showed good growth. According to Rajasthan Petroleum Dealers Association (RPDA), the state lost revenues of Rs 44 crore due to the closure of petrol pumps on Wednesday.
Speaking to TOI, Suneet Bagai, former president of RPDA, said that lower VAT has many advantages as it would give relief to the common man while increasing tax revenues. Citing the reduction of VAT on diesel in November 2021, Bagai said, “Diesel sales improved by 17.2% in 2023 because of lower VAT and brought more reve nue to the government. More importantly, people got some relief. Additionally, lower fuel rates bring down the prices of goods and services.”
‘Vehicles fill tanks before entering Raj’
Jaipur : He said the rates need to be on par with those of the neighbouring states as the gap is currently wide enough for people to skip Rajasthan’s fuel stations and buy from other states.
“The VAT on diesel in Rajasthan is higher by over 9% compared to Punjab. Trucks, cars and other vehicles passing through Rajasthan do not buy fuel from the state. They fill their tanks before entering the state or after crossing the state. The state loses huge revenue because of higher VAT,” Bagai said.
Calculating the possible gains, Bagai said if the rates are reduced to the levels in Punjab, the sales can increase by 25% and revenue to the state exchequer by 23%.
He said that the plan for the indefinite strike stands as of now.