Center bears full burden of fuel tax reduction, says Nirmala Sitharaman

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Ms Sitharaman says basic excise duty on petroleum products, which is shareable with states, remains unchanged

Ms Sitharaman says basic excise duty on petroleum products, which is shareable with states, remains unchanged

Union Finance Minister Nirmala Sitharaman said on Sunday that the entire petrol and diesel duty reduction announced on Saturday was made from the Road & Infrastructure Cess (RIC) component of levies on petroleum products, so the entire burden of the tax cuts will be borne by the Center,

Allaying fears that the duty cuts would reduce the decentralization of taxes to the states, Ms Sitharaman said the basic excise duty on petroleum products, which is shareable with the states, was not affected.

The Union Minister’s remarks come after some state and opposition leaders criticized his urge to continue these duty cuts by drastically reducing state-level levies on petroleum products.

Former Minister of Finance and Interior, P. Chidambaram, pointed out that the situation of the states is akin to being between “the devil and the deep sea”, as they perceive very little in terms of sharing oil rights .

“Their income comes from the VAT on petrol and diesel…I wonder if they can afford to give up that income unless the Center grants them more funds or gives them more subsidies” , he noted.

Tamil Nadu Finance Minister Palanivel Thiaga Rajan has reacted by saying that the Union government has failed to inform or seek advice from the states while raising the central taxes on petrol by about ₹23 per liter (+250%) and around ₹29 per liter (+900). %) on diesel since 2014. “Now after reversing ~50% of their increases, they are urging states to reduce,” he said in a tweet, noting that it was an expectation unfair and unreasonable.

“Good to see the interest in yesterday’s decision by @PMOIndia @narendramodi to bring excise duty reduction on petrol and diesel,” she said in a tweet. , before sharing “some useful facts” that could benefit from “review and review”. tax cuts.

The total taxes levied on petrol and diesel consist of a basic excise duty (BED), a special additional excise duty (SAED), the road and infrastructure tax (RIC) and the tax of agricultural and infrastructure development (AIDC), of which only the BED can be shared with the States, underlined the Minister.

Ms Sitharaman said the duty cuts announced in November 2021 of ₹5 per liter of petrol and ₹10 per liter of diesel have also been fully realized in the Road and Infrastructure Cess component of petroleum taxes.

The total revenue implication for the Centre, on these two duty cuts, is ₹2,20,000 crore per annum, the finance minister noted, before pointing out that development and grant spending has accelerated under the government of Prime Minister Narendra Modi.

RBI data shows that the total development expenditure incurred from 2014 to 2022 was ₹90.9 lakh crore. In contrast, only ₹49.2 lakh crore was spent on development expenditure between 2004 and 2014, she said.

“Expenditure incurred by our government so far includes ₹24.85 lakh crore spent on food, fuel and fertilizer subsidies and ₹26.3 lakh crore on capital creation. Over the 10 years of UPA , only ₹13.9 lakh crore was spent on grants,” she said. concluded.

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