Fuel Tax Cut Unlikely As Centre Projects Rs 30,000 Crore Revenue Hit

Fuel Tax Cut Unlikely As Centre Projects Rs 30,000 Crore Revenue Hit

As Andhra Pradesh joined Rajasthan in reducing VAT on petrol and diesel, the Centre on Monday seemed to be holding out against a cut in taxes amid rising pressure, with officials indicating that the government did not want its welfare schemes to suffer for want of revenue.

While opposition parties supported the Congress-called Bharat bandh, BJP blamed global factors for the rise in pump prices of petrol and diesel. “We are standing with people in their problem. We are trying to redress the issue and will do that,” law and IT minister Ravi Shankar Prasad told a press conference.

Government officials, however, suggested that the Centre may not lower duties as a Rs 2 per litre reduction would impact revenue by Rs 28,000 crore to 30,000 crore. Instead, more states are expected to reduce VAT, which will lower prices without impacting the Centre’s tax collection. “We pass on over 40% of the taxes that we collect to the states. So, any reduction by us will impact everyone,” said the official, after the Andhra government announced a reduction of Rs 2 in the prices of auto fuel. Besides, officials argued, states follow a system of ad valorem levies, which pushes up the revenue, whenever prices go up. Read more

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