No more fuel tax cuts: Thiaga Rajan

‘Union taxes are still exorbitant’

Finance Minister Palanivel Thiaga Rajan on Friday ruled out any further cut in the State taxes on fuel as the Union Government’s taxes remained “exorbitant” and the State would face an additional revenue loss of about ₹1,050 crore a year because of the Union Government’s tax cut.

Pointing out that Tamil Nadu was the first State to reduce the tax on petrol by ₹3 a litre, he said the Union Government’s reduction in tax by ₹5 a litre on petrol and ₹10 a litre on diesel would result in a revenue loss of ₹1,050 to the State annually. This was because Tamil Nadu levied ‘ad valorem’ taxes. This would be in addition to the loss of around ₹1,160 crore a year on account of the State Government’s decision to cut the taxes.

He said in a statement that the Union Government’s request to the States to reduce their taxes was “not reasonable”. Mr. Thiaga Rajan said there were many components such as basic price, Union excise and cesses/surcharges on the basic price, transport costs and State Government taxes.

The Minister said the Union Government had continuously increased the taxes on petrol and diesel over the past seven years. “If it were to reduce the taxes to the 2014 rates, the State tax — levied as an ad valorem tax on the sum of basic price and Union government levy — will automatically reduce.” “On August 1, 2014, the basic price was ₹48.55 a litre for petrol and ₹47.27 a litre for diesel. On November 4, 2021, the basic price of petrol was ₹48.36 a litre, while that of diesel was ₹49.69 a litre. On August 1, 2014, the Union Government taxes were ₹9.48 a litre on petrol and ₹3.57 a litre on diesel. At that time, the State Government taxes were ₹15.47 a litre on petrol and ₹10.23 a litre on diesel,” he pointed out.

He said that after the reduction in taxes by the Union Government, the tax on petrol was ₹27.90 a litre, compared with ₹32.90 a litre earlier, and ₹21.80 a litre on diesel, compared with ₹31.80 a litre earlier. Compared with 2014 (when the basic price was roughly the same), the Union Government was still levying an additional tax of ₹18.42 on a litre of petrol and ₹18.23 on a litre of diesel, Mr. Rajan said.

Tamil Nadu was levying a tax of ₹21.46 on a litre on petrol and ₹17.51 on a litre on diesel. The additional taxes of ₹9 a litre on petrol, which was reduced by ₹3 in August, and ₹7.25 a litre on diesel relative to the 2014 level were imposed by the previous AIADMK Government.

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