Finance Minister Nirmala Sitharaman on Friday reiterated that the Centre and state governments should mutually take a call about reducing taxes on fuel, to cushion the impact of record high domestic prices of petrol and diesel, PTI reported.
A doubling in the price of crude oil over the past 10 months has contributed to record fuel prices at gas stations in India. In some places in Rajasthan, Madhya Pradesh and Maharashtra, the prices have surged past Rs 100.
Taxes and duties account for roughly 60% of the retail price of petrol and diesel in the country.
As the coronavirus pandemic hit economic activity, Prime Minister Narendra Modi’s government twice raised taxes on petrol and diesel in the last 12 months by a record margin, to boost plunging tax revenues instead of passing on the benefits of low oil prices last year to consumers. Oil prices had plunged to a two-decade low in 2020.
Opposition leaders, cutting across party lines, have blamed the government for the soaring prices, saying it was not doing enough to provide relief to the common man out of arrogance.
The finance minister on Friday acknowledged that “there is enough case to say that prices should be down” and that “its a burden” for consumers. But she remained non-committal on taking the first step to cut central taxes to give relief to consumers.
While the burden on the consumers is understood, the pricing is a vexatious issue, she told reporters at the Indian Women’s Press Corps . “That’s where I use the word ‘dharamsankat [moral crisis]’,” the finance minister said. “It is a question which I would like states and the Centre to talk about because it’s not just the Centre which has duties on petroleum products, it also has the states charging.”
Sitharaman defended the government’s position, saying that both states and the Centre draw revenue out of taxes levied on petrol and diesel. She said 41% of the tax collections made by the Centre go to the states. “So, there is an issue, which is layered and as a result, that has to be a matter ideally for the Centre and the states to talk about,” she said.
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Asked about bringing petrol and diesel under the Goods and Services Tax regime, the finance minister said the decision has to be taken by the GST Council, the decision-making body of the indirect tax system.
Currently, the central government levies a fixed rate of excise duty, while states levy different rates of Value Added Tax. Under the GST, the two would merge and bring uniformity, solving the problem of fuel rates being higher in states due to higher VAT.
“Whenever the GST Council decides to take up this issue, they are well within their interest to take it up and discuss,” Sitharaman said. “It’s a call which the council has to take.”
Asked if the Centre will take such a proposal to the Council in the next meeting likely this month, she said a call will be taken “closer to the date of the Council meeting”.
After climbing for days, fuel prices have stabilised now, and remained steady for the seventh consecutive day on Saturday. Petrol price in Delhi stayed at Rs 91.17 per litre, while diesel was priced at Rs 81.47. In Mumbai, petrol was priced at Rs 97.57, while diesel cost Rs 88.60.
Sitharaman had last month, too, said that the Centre and states should talk to each other about reducing taxes on fuel. Reserve Bank of India Governor Shaktikanta Das had also called on the Centre and states to act in a coordinated manner to reduce tax on petrol and diesel.