Chennai: Finance Minister Palanivel Thiaga Rajan responded to Prime Minister Narendra Modi’s appeal to cut taxes on fuel. He said that it was neither fair not feasible for the State government to reduce taxes further, given that the Union government’s taxes remained exorbitant.
“We reiterate that the sole, simple and fair approach to improving the situation for all, is for the Union government to remove the levy of cesses and surcharges and revert to the rates that prevailed in 2014,” the Minister said in a press release. “We hope that the Union government will heed this reasonable request in the true spirit of co-operative federalism,” he added.
The state’s government had repeatedly appealed many times to the government to decrease the cesses and surcharges and merge them with the basic tax rates. He appealed this, so that the States got their rightful share from the proceeds of the Union government taxes, he said.
Referring to the remarks made by Prime Minister Narendra Modi,l in September 2021, prior to the Centre’s action, Tamil Nadu had cut VAT on petrol. He further highlighted that that the cut resulted in a relief of ₹3 per litre to the residents of Tamil Nadu.
“It was estimated that the State government would incur a loss of ₹1,160 crore annually due to this reduction. Yet, this was done despite the financial strain inherited from the previous government, to reduce the burden on the people,” the Minister said.
Since PM Modi had taken up the charge, in past seven years the Union government’s levies on petrol had gone up substantially. Union government’s revenue had increased manifold, but there had not been a matching increase in the States’ revenue, he said.
“This is because the Union government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the States,” he contended.
In November 2021, the Union government announced a 5% reduction in petrol taxes and a 10% reduction in diesel taxes. Because Tamil Nadu levies ‘ad valorem’ taxes that are applied after Union taxes, the Minister estimates that the Union government’s move costs Tamil Nadu an additional Rs. 1,050 crore in annual revenue.
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