On Sunday, Trinamool Congress leader Saket Gokhale took to Twitter to attack Finance Minister Nirmala Sitharaman on the cental government’s recent decision to reduce excise duty on petrol and diesel.
Sitharaman had announced a cut in excise duty on Saturday evening, which paved way for reduction of fuel price across India.
Calling the Finance Minister a ‘spin doctor’, the Trinamool Congress leader claimed that the decision is a loss to the exchequer of the states. As per Saket Gokhale, the reduction in excise duty meant that the centre will have to share the burden with the state, resulting in less devolution of excise duty to the states.
According to Saket Gokhale, the states’ share 42 per cent of the fuel excise duty, and after yesterday’s cut, the states have to forego Rs.2.52/litre on petrol and Rs. 3.36/litre on diesel in revenue.
He also claimed that the Finance Minister did not reduce the cess on fuels, which goes entirely to Union Govt. “It is an eyewash,” Gokhale, a known peddler of fake news, claimed on social media.
However, the claims made by former Congress troll-turned-TMC leader Saket Gokhale that the centre’s decision to slash the excise duty would cost the states’ share of excise duty are outrightly false.
Will states lose tax revenue due to excise rate cut?
Short answer is no. Let us understand how states will not lose any tax revenue due to a slash in excise rates by the centre.
The central government has the power to levy taxes on the production of petroleum products, while states tax their sale. The central government charges an excise duty of 31 per cent and 34 per cent of the current retail prices of petrol and diesel. In addition, the dealer commission is 4 per cent for petrol and 3 per cent for diesel.
Further, the state governments levy sales tax/ Value Added Tax (VAT), which vary across states.
In addition, the central excise duty has two components: basic excise duty and cess on petrol and diesel. The centre shares some part of the levied taxes with the states as part of its tax devolution process. The Centre retains the cess part and the remaining excise duty.
Besides this, there is additional excise duty. It is the duty which the Centre raises time-to-time when fuel companies lower the base price due to the lower cost of the crude oil in the global market. However, the Centre nullifies it by raising special additional excise duty to fund its infrastructure projects.
The latest reduction in the duty is not from the Excise duty but instead from the additional Excise Duty, which is not shared with the states. Hence, the proposed reduction is entirely borne by the Centre.
In addition, the claims of Saket Gokhale that the Centre has not reduced the cess and instead has only slashed the duties of excise duty are also untrue as the government officials have confirmed that the latest tax cut includes cutting the cess component, which will not impact states’ share of money from the tax collection.
Similar misinformation was shared by Congress leader and former Finance Minister P Chidambaram on Saturday evening after the announcement of reduction in excise rates. However, later when the circular was published, he retracted his comments and corrected himself that the entire burden of excise cut shall be borne by the Centre.
“Hence, contrary to what I said yesterday, the entire burden of the reduction falls on the centre. To that extent, I stand corrected. The states are getting very little by way of share of duties on Petrol and Diesel. Their revenue is from VAT on Petrol and Diesel,” P Chidambaram tweeted.
Hence, contrary to what I said yesterday, the entire burden of the reduction falls on the Centre. To that extent, I stand corrected
— P. Chidambaram (@PChidambaram_IN) May 22, 2022
The states are getting very little by way of share of duties on Petrol and Diesel. Their revenue is from VAT on Petrol and Diesel
Hence, the claim put out by Saket Gokhale that the centre is eating away the tax money of the states by slashing the excise duty without consulting the states is factually incorrect.
