India: Central govt rules out cuts to excise duty on fuel

  • 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 10 Sep 18.
  • 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 on 10 Sep 18.
  • Andhra Pradesh has followed Rajasthan’s lead, as it will cut petrol, diesel prices by INR2 per litre on 10 Sep 18. The move will lead to a INR11.2bn hit to the exchequer. Rajasthan had previously announced a 4% cut to petrol and diesel VAT on 9 Sep 18.
  • He said the government’s ability to give relief was only when its finances are strong. A one rupee per litre cut in taxes would result in revenues being hit by INR300bn on an annualised basis.
  • “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-Aug 18, rising almost every day due to a drop in rupee value and rise in crude oil rates. Petrol price has risen by an unprecedented rate. The official said every state collects VAT and also gets 42% of what Centre collects.
  • Meanwhile, BJP president Amit Shah met Oil Minister Dharmendra Pradhan on 10 Sep 18, sources with direct knowledge of the meeting said.
  • It was not immediately clear what transpired at the meeting, which took place at the BJP headquarters in the national capital.
  • While Pradhan was not reachable for comments, sources said assembly elections in Odisha and spiralling fuel prices may have topics of discussions between the two leaders. Assembly elections are due in Odisha in 2019.

External Link: https://economictimes.indiatimes.com/news/economy/policy/government-rules-out-excise-duty-cut-as-petrol-diesel-prices-hit-fresh-high/articleshow/65755826.cms

External Link: https://economictimes.indiatimes.com/news/politics-and-nation/andra-pradesh-cm-chandrababu-naidu-announces-reduction-in-petrol-diesel-prices-by-rs-2-per-litre/articleshow/65755369.cms

External Link: https://economictimes.indiatimes.com/news/politics-and-nation/amit-shah-meets-dharmendra-pradhan-as-petrol-diesel-prices-touch-record-high/articleshow/65758880.cms

10-Sep-2018


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