NEW DEHLI: Indian Government is likely to re-impose customs duty on crude oil at 3 percent in the upcoming budget.
With the weakening of crude prices globally and the expectation of the prices to go down further, the government is likely to look towards petrol and diesel as additional sources of revenue.
The customs duty on crude at 5 per cent was removed in June 2011 as the prices of crude were skyrocketing touching almost $120 per barrel.
The weakening crude prices make for a good argument to re-impose customs duty as it would not burden the consumers. The prices globally have crashed to $45 per barrel.
On Wednesday evening petrol price was cut by Rs 2.42 per litre and diesel by Rs 2.25 a litre in step with the fall in international oil prices.
This is the 10th straight reduction in petrol price since August 2014 and sixth in diesel since October 2014. After the price cuts, petrol price is at its lowest since September 2010 while diesel is cheapest since March 2013.
However, the government also increased the excise duty on petrol and diesel for four consecutive excise duty hikes since November, totalling Rs 7.75 a litre on petrol and Rs 7.50 on diesel. That is likely to fetch the government an additional Rs 21,000 crore out of which one third is the share of the states.
“Government is hard pressed for revenues and there is not much scope for the government in terms of increasing any taxes. The centre is keen to find alternative avenues for revenue. With decrease in crude prices globally, brining the customs duty back would be a possibility that the government can look at,” said Pratik Jain, Partner, Indirect Tax, KPMG.
