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No relief for consumers: Petrol, diesel prices at 4-year high but govt won't cut excise duty

The Centre and states both have their share of taxes on petroleum products. Currently, the central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. States have value added tax or VAT that vary from state to state.

twitter-logo BusinessToday.In        Last Updated: May 1, 2018  | 11:06 IST
No relief for consumers: Petrol, diesel prices at 4-year high but govt won't cut excise duty

Petrol and diesel prices have touched a 4-year high but the government still thinks that there is no need to cut excise duty on fuels. In an interview to PTI, Economic Affairs Secretary Subhash Chandra Garg on Monday said that the government was not considering cutting excise duty on petrol and diesel yet as rates have not touched levels that could trigger such an action.
 
According to the Economic Affairs Secretary, every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs 13,000 crore.  And if the level of fuel prices do not go up, there is no reason for any tax cut, Garg said without indicating the level. He also said that '...fundamental reasons, to my mind, don't exist for oil prices to go up further from both demand and supply situation'.

In the third week of April, petrol price hit a 55-month high of Rs 74.63 and diesel rates touched an all time high of Rs 65.93 per litre. And the prices remained constant with no revision in all metro cities - Delhi, Kolkata, Mumbai and Chennai - for over a week now.  Today's petrol price in Delhi is Rs 74.63, in Kolkata Rs 77.32, in Mumbai Rs 82.48 and in Chennai Rs 77.43  per litre.

The Centre and states both have their share of taxes on petroleum products. Currently, the central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. States have value added tax or VAT that vary from state to state. For instance, Maharashtra levies 46.52 per cent VAT on petrol, Kerala has 34 per cent and Goa imposes 17 per cent tax on petrol.

If added together, both the taxes - excise and VAT - would account to half of the actual price of petrol and diesel. It is for this reason, India has the highest retail prices of petroleum products among South Asian nations.

The petrol and diesel prices have been on rise despite the fall in global crude price since their 2014 level. It happened because the Central government - between November 2014 and January 2016 - raised excise duty nine times to shore up finances. Now the crude oil prices are picking up but the government is still not considering excise duty cut, a move that has hit the middle class the most.  

The government's decision to have this level of taxes on fuel has irked the consumers who now want the authorities to either cut down the taxes or bring petrol and diesel under the GST. In both the cases, the government's revenue will take a hit, which it does not want given the current fiscal deficit target.

Earlier, a Finance Ministry official said that the excise duty cut would not be advisable if the government wants to stick to the fiscal deficit path outlined in Budget.

 

 

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