New Delhi, March 14 (IANS) The government should rationalize the tax regime for the petroleum sector by bringing key products like petrol and diesel under the Value-Added Tax (VAT) regime and, at the same time, also phase out subsidies that cause a drain on the public exchequer, said a leading trade body Friday. “The government should gradually phase out subsidies being extended to sectors like food, fertilizer and petroleum and, on the other hand, it should also rationalize taxes on the petroleum products in the overall national interests,” The Associated Chambers of Commerce and Industry of India (Assocham) said in a statement Friday after releasing the findings of a study on petroleum sector taxation.

“Although sales tax has been abolished but state governments continue to subject oil companies to different sales tax rates, varying from 33 percent to 18.9 percent in case of petrol and 34 percent to 8.23 percent for diesel,” Assocham said.

The trade body has also expressed concern over the uneven sales tax rates charged by the various on key petroleum products like petrol and diesel even after the introduction of the Value Added Tax (VAT) regime in the country.

“The element of taxation on petrol and diesel is to the extent of about 140 percent and therefore, at least their should be a uniform VAT of 8 percent on petroleum products particularly for diesel and petrol so that oil companies are given some respite from higher crude oil prices internationally and ‘Aam Adami’ is also not subjected to unnecessary burdens,” Assocham said.

Assocham said the share of tax in the selling price of petrol in Sri Lanka, Thailand and Pakistan is 37 percent, 24 percent and 30 percent respectively.

“On the other hand, tax component is as high as 57 percent in the retail price of petrol in Delhi,” the trade body said.

“While other countries have kept tax on diesel below 20 percent, the same is 35 percent in Delhi, Assocham added.