The petroleum dealers in the State are urging both the Central and State governments to adopt a uniform tax regime, such as the Goods and Services Tax (GST), across the country. This plea comes after a peaceful protest by a group of dealers from certain North Indian States, who have put forth various demands including this one.
The call for uniform taxes is rooted in the idea that it would eliminate the need for consumers living near State borders to travel to neighboring States to purchase fuel. Currently, differences in Value Added Tax (VAT) rates contribute to varying fuel prices. Implementing uniform taxes would alleviate this issue, benefiting both consumers and dealers situated near State borders.
One of the main concerns of the dealers is the need for an increase in their profit margins. A committee known as the Apoorva Chandra Committee, which presented its findings in 2016, highlighted that dealers would need to sell 170 kilo litres of fuel per month to break even. According to estimates, at this level of sales, a dealer would receive a remuneration of ₹27,500 per month, along with 5 paise per litre on diesel and 7 paise per litre on petrol, translating to approximately ₹6,377 per month.
Dealers argue that the 34 paise per litre provided to them as operating costs does not cover all their expenses. Additional costs, including expenses related to the internet, local government taxes, fire fighting equipment, point of sale machine expenses, and internet charges, are not covered by this amount. This is particularly relevant for dealers who sell less than 110 kilo litres per month.
A low-volume dealer cited the example of increasing employee salaries over time but without a corresponding increase in profit margins. Despite recommendations by the Apoorva Chandra Committee to adjust margins every six months, the competitive landscape and the rising number of retail outlets, currently at around 86,000 nationwide, pose challenges to sustaining business growth.
In Tamil Nadu alone, there are approximately 6,500 retail outlets that sell fuel supplied by State-run oil marketing companies. The competition among dealers and the establishment of new outlets in close proximity further compound the difficulties faced by low-volume dealers.
The petroleum dealers' plea for uniform taxation and improved profit margins underscores the challenges and complexities within the fuel retail industry in India.
CAclubindia
