Govt raises infrastructure tax on petrol, diesel by Rs 5 per liter

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February 28, 2020

The government has decided to raise infrastructure development tax being levied on petroleum products by Rs 5 per liter.

Speaking at a press conference on Thursday, Minister for Finance Yuba Raj Khatiwada, who was also appointed as the government’s spokesperson recently, said that the cabinet meeting held on Monday took the decision.

With the decision to double the infrastructure development tax, the government will collect a total of Rs 10 per liter on the import of aviation turbine fuel (ATF), petrol and diesel from now onward. Previously, such tax was Rs 5 per liter.

The government has also made it clear the revision of infrastructure development tax will not put additional financial burden on consumers.

The government started collecting the tax under this new heading from Fiscal Year 2017/18 as a source to finance Budhi Gandaki Hydropower Project. However, billions of rupees collected for the project from the heading over the past three fiscal years have remained unutilized. Started as tax for Budhi Gandaki Hydropower Project, the government changed the heading of the tax in the current fiscal year to infrastructure development tax. The government has been mobilizing Rs 8 billion-Rs 12 billion from the NOC from the heading every year.

As Nepal Oil Corporation (NOC) is the sole importer of petroleum products in Nepal, the government utility will be liable for the tax, according to officials at the Ministry of Finance.

The decision to increase the tax comes at a time when the government is struggling to meet its revenue target.

As the NOC has been making profit in recent years mainly due to low price of petroleum products in the international market, the government has found revision of infrastructure development tax an easy way to address the revenue shortfall.

According to the Financial Comptroller General Office, the government has been able to collect only 46.25% of the total revenue target as of Wednesday. Though the government has set a target of collecting Rs 1,112 billion in revenue in the current fiscal year, it has managed to raise only Rs 514.28 billion over the first seven and a half months of the current fiscal year.

The decision to double the infrastructure development tax is estimated to add nearly Rs 21.6 billion in government revenue.

While the tax hike is not directly adding financial burden on consumers at least for now, the decision is likely to squeeze profit of the NOC.

“Though the government has decided to raise the tax, we are not going to increase price of petroleum products,” Birendra Goit, the NOC spokesperson, told Republica. “This could, however, squeeze our profit.”

According to NOC’s projection of February 1, it is making a profit of Rs 5.24 per liter on petrol, Rs 6.66 per liter on diesel and Rs 10.03 per liter on ATF. The projected profit is after provisioning all applicable taxes and charges, technical losses and expenses.

 

Source: My Republica