Shortfall will vary by level in other states tub To collect States with higher VAT will see a slight reduction in pump prices. The higher passthrough is due to an incremental reduction in state levies as VAT is levied after excise duty and dealer commission.
The governments of UP, Gujarat, Goa, Karnataka, Uttarakhand, Assam, Manipur, Tripura and Bihar cut VAT on fuel. BJP It governs all these states, except Bihar where it is in alliance with the JD(U). Elections are going to be held in UP, Goa, Uttarakhand, Gujarat and Manipur next year. The sharpest cut in excise duty will reduce the opposition’s leverage against the BJP on the issue of fuel taxes and price hike. However, this will leave a hole of around Rs 60,000-65,000 crore in tax collection in the remaining months of the current financial year.
Opposition slams government for not fully withdrawing high levy
Higher collections in other taxes are expected to bridge this gap. A finance ministry statement said the reduction in excise duty on diesel, the main fuel for agriculture and transport sectors, will help farmers in the upcoming rabi season.
It appealed to the states, which had also increased VAT at a time of falling crude oil prices, to match the Centre’s move by reducing VAT for a major relief to consumers.
“Indian farmers, through their hard work, have maintained the pace of economic growth even during the lockdown phase and the drastic reduction in excise duty on diesel will give a boost to farmers during the upcoming Rabi season.”
Other opposition parties like Congress and TMC, however, raised the slogan. Govt for not fully withdrawing higher levies in 2020 after COVID outbreak. In addition, there was criticism that the Centre’s reduction in excise duty would also affect the states as they account for 41.5% of the central taxes. Critics suggested that the Center should instead reduce the cess which is not shared with the states.
The Center raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March and May last year, when oil prices fell due to the pandemic. The two hikes had raised excise duty on petrol by 65% from Rs 19.98 to Rs 32.98 per liter and on diesel by 79% from Rs 15.83 to Rs 28.35.
The increased excise duty boosted the Centre’s fuel tax collection by 88% to over Rs 3 lakh crore in 2020-21 despite lower sales amid the pandemic. Duty collection from diesel alone had increased by 108 per cent due to higher taxes.
As crude oil prices began to rise in recent months, higher taxes compounded the effect and drove pump prices to record highs. Petrol price is currently running above Rs 100 per liter almost across the country and diesel sales are nearing the century mark in almost all states with high VAT.
Record pump prices are adding to inflationary pressures, the statement said. “The world has also seen energy shortages and inflated prices of all kinds. NS Indian government Efforts have been made to ensure that there is no shortage of energy in the country and commodities like petrol and diesel are sufficiently available to meet our needs.
Watch A day after by-poll setbacks, Center cuts excise duty on petrol and diesel
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