AAP government likely to introduce 5 per cent VAT on CNG

Travel by public transport is likely to get expensive as the AAP government is in the process of introducing five per cent value-added tax (VAT) on compressed natural gas (CNG) in the national capital. So far, CNG had been exempt from VAT in Delhi. Once VAT is imposed on CNG, it will not only create a political furore but also will increase the cost of travel by public transport.

After its failure to meet even the scaled-down target of Rs 21,000 crore through VAT, the AAP government might also impose five per cent VAT on plastic waste, textiles and fabrics and readymade garments costing above Rs 2,000. There are indications that the government might increase VAT on UPS from 5 to 12.5 per cent and on liquor from 20 to 25 per cent.

The Kejriwal government is set to announce five per cent VAT on CNG during the Budget Session on Monday. The imposition of VAT on CNG is likely to add Rs 156 crore every year to the state exchequer. Estimates show that imposition of VAT on CNG will help the government to generate Rs 42 lakh every day.

The CNG price was last increased by Indraprastha Gas Limited in October last year. The IGL had priced CNG at Rs 37.20 per kg for Delhi and Rs 42.60 per kg for the National Capital Region. Once VAT is imposed on CNG, its price is bound to increase by Rs 1.86 paise per kg.

There are about four lakh vehicles operating on CNG in the national capital. Of these, 80,000 are three-wheeler autorickshaws, 6,500 buses, 20,000 taxis and 5,000 light goods vehicles.

The imposition of VAT is likely to see stiff opposition from the auto-rickshaw and taxi drivers who are expected to demand an immediate hike in their fares. Cash-st-rapped DTC, whose losses have doubled over the yea-rs, is going to be the major victim of the new VAT reg-ime. A senior officer said the AAP government may be forced to even increase the DTC fares, which have not been revised during the past five years.

A political analyst said both the Congress and the BJP are likely to oppose the imposition of VAT on CNG as it would subsequently lead to hike in fares of public transport. The Sheila Dikshit government too had tried to impose five per cent VAT on CNG in 2012, but was forced to withdraw the proposal due to strong opposition from ruling Congress MLAs, who argued that any increase in the fuel price would result in hike in taxi and auto fares and subsequently create a negative impact on the party’s performance in 2013 Assembly polls.

According to a senior official, the trade and taxes department moved a proposal to bring certain commodities under the ambit of VAT and also to increase tax on other products in February. The department had proposed increase in VAT after it failed to meet its scaled-down target. Earlier, the AAP government had set the target of Rs 24,000 crore through VAT collections.

The administration had been able to collect about Rs 18,000 crore through VAT in the last fiscal. However, the VAT department has so far been able to collect only Rs 20,000 crore this year.