Govt rules out excise duty cut as fuel prices hit fresh high


New Delhi, Sep 11(DC): A cut in taxes on petrol and diesel is ruled out for now as neither the central government nor some states have the appetite to stomach revenue loss from such a move, a top government official said on Monday.

While a cut in excise duty that the central government levies will impact fiscal deficit, states like Bihar, Kerala, and Punjab are not in a position to cut sales tax (or VAT), the official, who wished not to be identified, said.

The government, he said, anticipates that international oil prices, which together with a drop in the value of rupee has been fuelling the fuel price rise to record levels, will moderate in coming days to take pressure off.

The comments come on a day when opposition parties held nationwide protests against record high petrol and diesel prices. Prices in Delhi, where rates are the cheapest among all metros and most state capitals because of lower VAT, saw petrol touch an all-time high of Rs 80.73 per litre on Monday while diesel scaled to new high of Rs 72.83 a litre.

The official said consumers will have to pay for the fuel they use.

While Rajasthan on Sunday announced a 4 percentage point cut in VAT on petrol and diesel, Andhra Pradesh on Monday said fuel prices will be reduced by Rs 2 each from cut in sales tax. “A cut in oil taxes will add to the fiscal deficit. National fiscal deficit determines bond yield and with a higher fiscal deficit the rupee becomes shakier,” the official said. “Then (as a result of cut in taxes) you have to make budget cuts in developmental expenditure. This is the real consequence of oil tax cut.”

He said the government’s ability to give relief was only when its finances are strong. “States do not have the capacity to reduce rates,” he said. A one rupee per litre cut in taxes would result in revenues being hit by Rs 30,000 crore on an annualised basis.

“Oil prices disturb your CAD,” he said adding oil companies will not be asked to take a hit for now as users should pay for the utility they use.

“We will be able to lower taxes when we are able to increase compliance on income tax and GST. Till then dependence on oil will continue,” he said.

Fuel rates have been on fire since mid-August, rising almost every day due to a drop in rupee value and rise in crude oil rates. Petrol price has risen by Rs 3.65 a litre and diesel by Rs 4.06 per litre – the biggest increase in rates witnessed in any month since the launch of daily price revision in mid-June last year.

The official said every state collects VAT and also gets 42 per cent of what Centre collects.

Almost half of the fuel price is made up of taxes. The Centre levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy value-added tax (VAT) – the lowest being in Andaman and Nicobar Islands where a 6 per cent sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12 per cent on petrol, while Telangana levies the highest VAT of 26 per cent on diesel. Delhi charges a VAT of 27 per cent on petrol and 17.24 per cent on diesel.

The central government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 a litre in nine installments between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.

This led to its excise collections from petro goods more than doubling in last four years – from Rs 99,184 crore in 2014-15 to Rs 2,29,019 crore in 2017-18. States saw their VAT revenue from petro goods rise from Rs 1,37,157 crore in 2014-15 to Rs 1,84,091 crore in 2017-18.

“Our analysis shows that crude oil prices do not move in a straight line. Some months it goes up and some months it comes down,” he said. “Bringing oil in GST is not a solution. The only way taxes on oil can be brought down is by increasing non-oil tax-GDP ratio.”

The tax ratio can be raised not by increasing rates but by bringing evaders and non-filers in tax net. “2007 was the only year when we saw an increase in tax-GDP ratio. 2008-2014 it was static,” he said.

From 2014-18, there was an increase of 1.5 per cent in tax-GDP ratio. Of this, 50 per cent is non-oil and 50 per cent is oil. Next 5-6 years the target should be to increase non-oil tax to GDP ratio by at least 1.5 per cent and this is the long-term solution, he said.

In countries, which are tax compliant, oil is taxed at a rate that is less than that in India. “If we expand the tax base in the same proportion as we did last year then non-oil GDP ratio will go up,” he said. Giving an example, the official said if petrol is at Rs 83, then Rs 20 goes to states as taxes plus Rs 10 from Centre’s devolution. So states get Rs 30 out of Rs 42 collected as taxes.

Also, states levy VAT and this has increased their profits. The extra benefit accrued to states is Rs 3-4 per litre, he said. “We have given income tax relief to the tune of Rs 98,000 crore and also Rs 80,000 crore on account of GST rate cuts on 334 commodities,” he said. “The effect of this benefit has kept inflation under control despite rise in fuel prices. Inflation was 4.1 per cent in Vajpayee government, 5.8 per cent in UPA-1, 10.4 per cent in UPA-2 and in current NDA around 4.5 per cent average.”

The official said the four states, which have supported Bharat Bandh, collect high taxes themselves. AP gets Rs 22.15 per litre on petrol and Rs 16.87 on diesel. Karnataka gets Rs 18.88 on petrol, Rs 12.23 on diesel, Kerala Rs 19.09 on petrol and Rs 14.51 on diesel and Punjab gets Rs 21.81 per litre in taxes on petrol and Rs 10.07 a litre on diesel. While fiscal deficit means expenditure higher than income, current account deficit (CAD) is the difference between inflow and outflow of foreign currency.

  

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Comment on this article

  • Pais, Mangalore

    Tue, Sep 11 2018

    Bhaiyon Aur Behanoon, Just wait and watch, picture abhi bhaki hain...... Acche din Jaaney waley hai...

    DisAgree Agree Reply Report Abuse

  • shashi, Manglore

    Tue, Sep 11 2018

    In just 4 years this the fate of our country.Voting again to this fool (Tughluq rule) will be a Huge Disaster.

    DisAgree [1] Agree Reply Report Abuse

  • Jossey Saldanha, Mumbai

    Tue, Sep 11 2018

    All his Imported Designer Jackets cost above Rs. 12 Lacks ...

    DisAgree [1] Agree [2] Reply Report Abuse

  • kumara, abu dhabi

    Tue, Sep 11 2018

    when India took loans nobody questioned?

    DisAgree Agree [2] Reply Report Abuse

  • Joseph F. Gonsalves, Bannur, Puttur / Mangalore

    Tue, Sep 11 2018

    I QUOTE ONE COMMENT:

    sri_elder, Karkala Thu, Sep 6 2018
    Why sickulars continuously complaining about dollar worth, petrol diesel prices etc?

    Are they drink petrol, diesel daily instead chai, coffee? Or they do all daily transaction in dollar? For general public it is immaterial

    UNQUOTE.

    IT SUITS WELL WHEN BJP IS RULING WHEN THE BHAKTS SUPPORT UN-CONDITIONALLY.

    THIS TIME IN THE YEAR 2019 BJP WILL BE OUT SUPPOSEDLY THEY DON'T PUT FORWARD HINDU CARD.


    THE NAARA/SLOGAN WILL BE:

    HINDUSTAN BACHAVO.
    HINDUVOUMKO BACHAVO,

    BHAKTS WILL NOT COMMENT HOW HINDUSTAN HAS BECOME RAPISTAN.

    Drink not Petrol and Diesel.
    Drink Chaai and costly Alcohol . Is this your slogan???!!!

    WHY ALCOHOL IS COSTLY AND WHY PETROL IS COSTLY???!!!
    WHY NO JOBS TO OUR YOUTHS.

    BANKS ARE MODIFIED INTO LOOTERS.

    IT IS TIME FOR A BREAK TO CHAAIWAALA TO LEARN ECONOMICS IN THE HARWARD OR OXFORD UNIVERSITY.

    NAGPUR UNIVERSITY HAS PROVED WORTHLESS.

    DisAgree [4] Agree [7] Reply Report Abuse

  • Truth Teller, Karnataka

    Tue, Sep 11 2018

    Government is deliberately doing this and wants to collect a huge sum so that when elections are nearby, they will reduce the prices and bakhts will start dancing and will vote for Modiji!!!!. Once Modiji comes back to power, he will take back everything with interest!!!!

    DisAgree [2] Agree [12] Reply Report Abuse

  • R Bhandarkar, Mangaluru

    Tue, Sep 11 2018

    Don't worry
    The Common Man Will do the final calculations in 2019
    CAD and all other things will be taken care of then
    State Centres share and everything will be taken care of.
    COMMON MAN IS THE FINAL AUDITOR.
    HIS RULING WILL PREVAIL.

    DisAgree [5] Agree [11] Reply Report Abuse

  • HENRY MISQUITH, Bahrain

    Tue, Sep 11 2018

    A Failure is a Failure No Matter how you promote it as success. My Honest view too is same as an Indian Citizen & not as a political persona. As a Citizen I have been deceived with fake promises and Marketing Blitz campaign

    DisAgree [3] Agree [11] Reply Report Abuse

  • geoffrey, hat hill

    Tue, Sep 11 2018

    Wouldn't count on that in this era of EVM.

    DisAgree [1] Agree [6] Reply Report Abuse

  • Stan, Udupi/Dubai

    Tue, Sep 11 2018

    Let them fill the coffers with tax money. People will teach them lesson in 2019.

    DisAgree [2] Agree [10] Reply Report Abuse

  • David Pais, Mangalore

    Tue, Sep 11 2018

    stop foreign tours & paying 2 rss.

    DisAgree [4] Agree [20] Reply Report Abuse

  • Gangaram, Moodbidri

    Tue, Sep 11 2018

    This half game will continue until they prepare voting in some states in November - December and then in Feb - March before LS elections...... note my words that time they will reduce the oil prices........


    Can Modi and his bakths can tell now how MMS controlled oil price when crude oil price was $140 per barrel........

    DisAgree [1] Agree [17] Reply Report Abuse

  • anthony, Mangalore

    Tue, Sep 11 2018

    The Govt will rule out excise duty cut becoz they need to take care of all their irresponsible actions like Demonitisation, GST, NPA's of Banks, billions of Dollors they have offloaded to support the falling rupee etc

    They care two hoots to the sufferings of the common man.

    DisAgree [1] Agree [11] Reply Report Abuse

  • HENRY MISQUITH, Bahrain

    Tue, Sep 11 2018

    BJP's days are numbered. This party is constantly failing to understand the common man ..

    DisAgree [1] Agree [20] Reply Report Abuse

  • David Pais, Mangalore

    Tue, Sep 11 2018

    ಅಹಂಕಾರದ ಪಿತ್ತ ನೆತ್ತಿದ ಮಿತ್ತ್ ಏರ್ತಂಡ್

    DisAgree [1] Agree [10] Reply Report Abuse

  • Truth Teller, Karnataka

    Tue, Sep 11 2018

    The people who have enjoyed the pleasures of organised loot and plunder, so not give up on their looting so easily!!!.

    DisAgree [1] Agree [11] Reply Report Abuse


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Title: Govt rules out excise duty cut as fuel prices hit fresh high



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