Finance Minister Nirmala Sitharaman on August 7 slammed the opposition on demands for a reduction in central taxes on fuel citing that many states ruled by parties belonging to the INDIA alliance have infact recently raised levies on petrol and diesel.
Sitharaman said that since 2021, the central government has initiated moves to reduce the price of fuel thrice, and states governed by the ruling party have followed suit. However, the opposition has failed to walk the talk on the matter. The finance minister brought up a few examples to back her claim, including the increase in value-added tax (VAT) on petrol and diesel in January 2023 by the Congress-led regime in Himachal Pradesh .
"I am asked about relief on excise duty on petrol and diesel relief. Both in November 2021 and May 2022, the Centre reduced the excise duty on petrol and diesel. Both the times put together, the reduction was 13 rupees per litre for petrol and 16 rupees per litre for diesel. Even in March 2024, petrol and diesel prices were cut again by 2 rupees per litre across the country. But, the centre initiated the reductions and then BJP ruled states followed suit. Now opposition wants cuts on fuel tax. It was done thrice," she said during her reply on the Finance Bill in the Lok Sabha.
Sitharaman said that opposition parties should administer cuts in taxes on fuel in states governed by them before lecturing the central government.
"States like Himachal increased VAT on petrol and diesel in January 2023 and Karnataka government in June 2024 hiked the sales tax on fuel making petrol and diesel costlier. Punjab government in June 2023 led by AAP government hiked VAT on petrol and diesel as well," the minister added.
Data from the Petroleum Planning and Analysis Cell (PPAC) show that states impose an average VAT of 21 percent on petrol and nearly 16 percent on diesel. Telangana imposes the highest levy on petrol, at 35.20 percent, followed by Andhra Pradesh at 31 percent and Kerala at 30.08 percent.
When it comes to diesel, Telangana again tops the chart with a 27 percent VAT followed by Maharashtra at 24 percent.
After the implementation of the goods and services tax regime, both states and Centre gave up the right to unilaterally impose taxes on various sectors with the former left with three crucial avenues to raise revenues — liquor, land and fuel.
Consequently, many states rely on fuel taxes to fund key schemes. Levies on petroleum comprise about 15 percent of states’ own tax revenues.
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