New Delhi, Sep 10: The central government has ruled out any reduction in the excise duty on petrol and diesel for now despite the retail prices hitting new highs, a top government official told news agency PTI. According to the official, lower excise duty on petrol and diesel will impact fiscal deficit, while states like Bihar, Kerala, and Punjab are not in a position to cut sales tax (or VAT) on fuel.
The government, he said, believes that international oil prices will come down in coming days. Rising global oil prices and declining value of rupee against the US dollar have left petrol and diesel prices on a record high. “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. Petrol And Diesel Price Reduced by Rs 2 Per Litre in Andhra Pradesh as CM Chandrababu Naidu Cuts VAT on Fuel.
“Then (as a result of the cut in taxes) you have to make budget cuts in developmental expenditure. This is the real consequence of the oil tax cut. States do not have the capacity to reduce rates," he added. In October last year, the Centre had cut excise duty by Rs 2 a litre after raising it on petrol by Rs 11.77 a litre and that on diesel by 13.47 a litre in nine instalments between November 2014 and January 2016.
While Rajasthan on Sunday announced a 4 per cent cut in the VAT on petrol and diesel, Andhra Pradesh Monday said fuel prices will be reduced by Rs 2 each from a decrease in sales tax. 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. Bharat Bandh Fails, Hike in Fuel Prices Momentary Difficulty: BJP.
The official also said that bringing petrol and diesel under Goods and Services Tax (GST) won't reduce their prices. “Bringing oil in GST is not a solution. The only way taxes on oil can be brought down is by increasing non-political tax-GDP ratio.” The tax ratio can be raised not by increasing rates but by bringing evaders and non-filers in the tax net. “2007 was the only year when we saw an increase in the tax-GDP ratio. 2008-2014 it was static,” 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 current NDA around 4.5 per cent average.”
The official said the four states which have supported Bharat Bandh collect high taxes themselves. Andhra Pradesh gets Rs 22.15 per litre on petrol and Rs 16.87 on diesel. Karnataka receives 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. (With PTI inputs)