On Sunday, Trinamool Congress Leader Saket Gokhale took to Twitter to attack Finance Minister Nirmala Sitharaman over the central government’s recent decision to cut excise duties on petrol and diesel.
Sitharaman had announced a cut in excise duties on Saturday evening, which paved the way for a reduction in fuel prices across India.
Calling the finance minister a “spin doctor,” Trinamool’s congressional leader claimed the decision was a loss for the states treasury. According to Saket Gokhale, the reduction in excise duties meant that the center would have to share the burden with the state, which would reduce the devolution of excise duties to the states.
According to Saket Gokhale, states share 42% of excise duty on fuel, and after yesterday’s cut, states have to waive Rs.2.52/litre on petrol and Rs. 3.36/litre on fuel. diesel in revenue.
He also claimed that the finance minister had not reduced the fuel tax, which is entirely the responsibility of the Union government. “It’s eyewash,” Gokhale, a known peddler of fake news, said on social media.
However, claims by former Congress troll turned TMC leader Saket Gokhale that the center’s decision to cut excise duties would cost the states’ share of excise duties are completely false.
Will states lose tax revenue due to reduced excise rates?
The short answer is no. Let’s understand how states will not lose any tax revenue due to a reduction in excise rates by the center.
The central government has the power to levy taxes on the production of petroleum products, while the states tax their sale. The central government charges an excise duty of 31 percent and 34 percent of current retail gasoline and diesel prices. In addition, the dealer commission is 4% for gasoline and 3% for diesel.
In addition, state governments levy a sales tax/value added tax (VAT), which varies from state to state.
In addition, the central excise tax has two components: the basic excise tax and the gasoline and diesel tax. The center shares a portion of the taxes collected with the states as part of its fiscal decentralization process. The Center retains the remaining cess share and excise duties.
On top of that, there are additional excise duties. It is the fee that the Center raises from time to time when oil companies lower the base price due to the lower cost of crude oil on the world market. However, the Center cancels it by levying a special additional excise duty to finance its infrastructure projects.
The final reduction in duty does not come from the excise duty but rather from the additional excise duty, which is not shared with the states. Therefore, the proposed reduction is entirely borne by the Centre.
Furthermore, Saket Gokhale’s claims that the Center did not reduce the tax and only reduced the excise duty are also false as government officials have confirmed that the latest tax cut includes the reduction of the cess component, which will not impact the states’ share of the money from tax collection.
Similar misinformation was shared by Congress leader and former finance minister P Chidambaram on Saturday night after the announcement of the cut in excise rates. However, later when the circular was issued, he backtracked on his comments and corrected himself by saying that the entire burden of excise duty reduction should be borne by the Centre.
“So, contrary to what I said yesterday, the entire burden of reduction falls on the center. To this extent I am corrected. States receive very little duty sharing on gasoline and diesel. Their income comes from VAT on petrol and diesel,” P Chidambaram tweeted.
So, contrary to what I said yesterday, the entire burden of reduction falls on the Centre. To this extent I am corrected
States receive very little duty sharing on gasoline and diesel. Their income comes from the VAT on petrol and diesel
— Fr. Chidambaram (@PChidambaram_IN) May 22, 2022
Therefore, Saket Gokhale’s claim that the center is eating away at states’ tax dollars by cutting excise duties without consulting the states is factually incorrect.