June 26: The government has been raising huge amounts of taxes on petrol, diesel, and cooking gas to the detriment of the general consumers. Generally, goods directly related to the daily life of the people are not taxed much. However, in Nepal, which has an import-oriented tax system, the government seems to have imposed higher taxes on essential commodities.
The government has been levying taxes on cosmetics, which belong to the luxury items, under three headings, but is levying taxes on petrol and diesel under six headings.
The government has been levying taxes on petrol and diesel under six headings that include customs duty, road maintenance tax, pollution tax, infrastructure development tax, price stabilization fund and value-added tax (VAT).
At present, people are paying Rs 179 for a litre of petrol which is being purchased at Rs 65.61 per litre by NOC while diesel which NOC purchases for Rs 49.53 per litre is being sold to the general public at Rs 163 per litre. Until a day ago, a litre of petrol used to cost as much as Rs 199 while diesel was priced at Rs 192.
Similarly, the government has been levying taxes worth Rs 320.84 for a cylinder of cooking gas (LPG).
The customs duty on petrol is Rs 25.23 per litre. Road maintenance tax is Rs 4 per litre, pollution tax is Rs 1.50, infrastructure development tax is Rs 10, price stabilization fund is 1 per cent, and VAT is 13 per cent.
The customs duty on a litre of diesel is Rs 12.03. The road maintenance tax is Rs 2, pollution tax is Rs 1.50, infrastructure development tax is Rs 10, price stabilization fund is 1 per cent, and VAT is 13 per cent.
Interestingly, the government has been collecting taxes on luxury items under fewer heading. Examples include beer and cosmetics. Both are luxury items.
However, taxes on these items are collected under fewer headings. Importers only need to pay customs duty, excise duty, and VAT while importing beer made from barley. Customs duty, excise duty and VAT also need to paid for the import of cosmetic items. Apart from this, many other luxury and fancy items are taxed under a few headings unlike petroleum products.
Tax experts say it is not appropriate to tax the items that fall under the category of essential goods.
Under normal circumstances, the general public had not paid much attention to the high taxes on petroleum products. However, the prices of petroleum products have increased sharply. At this time, the general public hopes that if the government reduced taxes, it would be more affordable. The Finance Act 2079, which was recently passed by the parliament, has not interfered with the tax rates on petroleum products.
Public transportation is not possible without petroleum products. Petroleum is needed to transport all kinds of goods, including food. Vehicles running on petrol and diesel are more in use in Nepal. Diesel is essential for hydropower projects and industries.
According to a study by the Confederation of Nepalese Industries, 64.4 per cent of industries are still using diesel-powered generators. Diesel is also used in agriculture. In this case, the rise in the price of petroleum products affects everyone.
When there is no proper alternative, it is not appropriate to raise taxes on petroleum products under many headings, says economist Dr Chandramani Adhikari.
“If there had been an alternative to petroleum products and gas in Nepal, levying such a tax would have been appropriate. Electricity has been taken as an alternative to petroleum products. However, this is not possible immediately due to the lack of development of necessary infrastructure. So it's not fair to impose taxes under many headings on fuel,” he added.
On top of that, the country is heading towards an economic crisis. In that case, it is not acceptable, the economist opined.