NEW DELHI: A day after Sitharaman announced a hefty fuel tax cut, Union finance minister Nirmala on Sunday said the two rounds of duty reductions—the last one being in November—will cost the exchequer Rs 2.2 lakh crore annually and the states’ share from the tax pool will not be affected as the Center had opted to cut cess on petrol and diesel, which are outside the divisible pool.
The non-BJP-governed states, however, held out against matching the Centre’s move by cutting VAT. Most of them argued that since VAT is usually charged as a proportion of the price (ad valorem) after adding central levies and other costs, the sharp reduction in excise duty has automatically brought down the tax in most states.
Only Bihar, where BJP is a partner in the government, has held out hope of a reduction in VAT, with chief minister Nitish Kumar saying he will discuss the issue with coalition members. In Karnataka, CM Basavaraj Bommai said the government will consider a further reduction, while Odisha is expected to decide in the next few days.
Sitharaman’s comments came following the opposition’s “criticism” or “appraisal” of the decision announced on Saturday aimed at blunting some of the impact of the Russia-Ukraine conflict on Indian households grappling with higher food and fuel prices. The Center on Saturday cut tax by Rs 8 on a liter of petrol and Rs 6 on diesel. On November 4, excise duty was cut by Rs 5 on petrol and Rs 10 on diesel.
The non-BJP-governed states, however, held out against matching the Centre’s move by cutting VAT. Most of them argued that since VAT is usually charged as a proportion of the price (ad valorem) after adding central levies and other costs, the sharp reduction in excise duty has automatically brought down the tax in most states.
Only Bihar, where BJP is a partner in the government, has held out hope of a reduction in VAT, with chief minister Nitish Kumar saying he will discuss the issue with coalition members. In Karnataka, CM Basavaraj Bommai said the government will consider a further reduction, while Odisha is expected to decide in the next few days.
Sitharaman’s comments came following the opposition’s “criticism” or “appraisal” of the decision announced on Saturday aimed at blunting some of the impact of the Russia-Ukraine conflict on Indian households grappling with higher food and fuel prices. The Center on Saturday cut tax by Rs 8 on a liter of petrol and Rs 6 on diesel. On November 4, excise duty was cut by Rs 5 on petrol and Rs 10 on diesel.
