Bookmark Kaumudi Online  Bookmark this site  Editor@Kaumudi  |  Marketing  Print Advt rates  |  Calendar 2018        Go!    
 
 
September 25, Tuesday 2018 8:54 PM       

       HEADLINES: P K Sasi controversy: Evidence collected from 6 persons                                              Violinist Balabhaskar’s daughter dies in accident                                              Tamil movie incites murder in Thiruvananthapuram                                              Abhilash Tomy brought to Amsterdam                                              Govt promise turns farce; farmer commits suicide in Wayanad                                              Rahul Gandhi a 'directionless leader', Cong creating campaign based on lies: Javadekar                                              Amit Shah to attend BJP workers meet in Jaipur on Wednesday                                              Pak won't abandon peace efforts despite India's reluctance: Qureshi                                              Maldives government acknowledges opposition victory                                              Trump's latest tariffs on China begin to bite                                              China says can't hold US trade talks with 'knife to the throat'                                              I'm a 'scapegoat' says sacked Sri Lanka captain Mathews                                              Test cricket should not be tinkered with, says Kohli                                              Kaumudi Facebook
       INDIA Next Article: Students leaving IIM-S due to shortage of hostel rooms  
       Govt rules out excise duty cut even as petrol, diesel hit fresh highs
 
         Posted on :11:25:05 Sep 11, 2018
   
A A
       Last edited on:13:11:06 Sep 11, 2018
         Tags: Petrol price, diesel price
 

NEW DELHI: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 percent 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 percent sales tax is charged on both the fuel.

Mumbai has the highest VAT of 39.12 percent on petrol, while Telangana levies the highest VAT of 26 percent on diesel. Delhi charges a VAT of 27 percent on petrol and 17.24 percent 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 instalments 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 percent in tax-GDP ratio. Of this, 50 percent is non-oil and 50 percent is oil. Next 5-6 years the target should be to increase non-oil tax to GDP ratio by at least 1.5 percent and this is the long-term solution, he said.

In countries which are tax compliant, oil is taxed at a rate which 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 percent in Vajpayee government, 5.8 percent in UPA-1, 10.4 percent in UPA-2 and in current NDA around 4.5 percent 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 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.

In an election year, the spending cut is not an option, the official said reasoning that it would hamper the government's spending on development schemes.

"The government cannot disturb fiscal maths by cutting excise duty," he said.

 

A A
       INDIA
Next Article: Students leaving IIM-S due to shortage of hostel rooms
 
 
INDIA HEADLINES
Amit Shah to attend BJP workers meet in Jaipur on Wednesday  
SC for declaration of criminal antecedents of candidates to EC  
SC refers PIL against female genital mutilation to five-judge constitution bench  
Petition moved in HC against triple talaq ordinance  
HC bans slaughtering of birds at Ghazipur mandi  
Prakash Ambedkar rejects Pawar's claims on poll support  
Guj: CBI arrests Indian Air Force officer for bribery  
Terrorism in Kashmir is Pakistan-sponsored: Rajnath Singh  
E V Ramasamy statue found vandalised  
Rahul fires fresh salvo at Modi on Rafale deal  
Rahul Gandhi a 'directionless leader', Cong creating campaign based on lies: Javadekar  
Two ministers dropped from Goa CM's Cabinet  
France fears Hollande's remarks on Rafale deal may hurt ties with India  
Pulwama encounter: Body of terrorist recovered  
Normal life paralysed due to heavy rains HP's Hamirpur  
PM Modi to visit Nepal again in November  
Telangana out of Ayushman Bharat scheme for time being  
Modi launches PMJAY-Ayushman Bharat, terms it biggest public funded healthcare scheme  
Encroachment on forest land can't be protected: Delhi HC  
AAP plans to contest 100 seats in next LS polls, focus on winning 25  
When will students be shifted from 99-year-old dilapidated school building: HC asks AAP govt  
Pak man sings Indian national anthem at Indo-Pak match  
PM to inaugurate Sikkim's first airport Monday  
Hollande's statement, Rahul's tweet "orchestrated": Jaitley  
PM Modi to launch Ayushman Bharat today  
 
Do you agree with KCBC's statement against nuns who protested?
yes
 
no
 
no opinion
 
 
 
Home Kerala India World Business Sports Sci&Tech Education Automobile CityNews Movies Environment Letters 
© Copyright keralakaumudi Online 2011  |  Reproduction in whole or in part without written permission is prohibited.
Head Office Address: Kaumudi Buildings, Pettah P.O, Trivandrum - 695024, India.
Online queries talk to Deepu Sasidharan, + 91 98472 38959 or Email deepu[at]kaumudi.com
Customer Service -Advertisement Disclaimer Statement   |  Copyright Policy