New Delhi: Supporting the central government’s pitch for states to reduce sales tax (VAT) on petrol and diesel, reserve Bank of India (RBI) Governor Shaktikanta Das It said on Wednesday that the reduction in VAT on fuel will help in easing inflationary pressures as well as expectations.
The central government had on May 21 cut excise duty on petrol by a record Rs 8 per liter and diesel by Rs 6 to provide relief to consumers suffering from high fuel prices, which have pushed inflation to an all-time high. At the time, it asked states to reduce VAT so that more relief could be provided. Almost no state has reduced VAT.
Announcing the bi-monthly monetary policy, Das said a quick survey of urban households conducted after the excise duty cut on petrol and diesel on May 21 showed a significant dip in their inflation expectations.
“In such a scenario, further reduction in state VAT on petrol and diesel across the country can certainly contribute to inflationary pressures as well as lower expectations,” Das said.
Finance Minister Nirmala Sitharaman had urged states to reduce VAT at the time of announcing reduction in excise duty. His other cabinet colleagues, including Oil Minister Hardeep Singh Puri, made similar arguments.
But after the announcement of reduction in excise duty on May 21, hardly any state has reduced VAT.
In April, Prime Minister Narendra Modi also asked states to reduce their taxes so that users can get the full benefit of the previous excise duty cut of November 2021. Non-NDA party ruled states did not reduce VAT.
After the November 2021 reduction in excise duty on petrol by Rs 5 per liter and on diesel by Rs 10 per liter, 25 states and union territories had cut VAT to provide further relief to consumers suffering from record-high retail prices.
However, states ruled by non-NDA parties such as Maharashtra, Andhra Pradesh, West Bengal, Kerala and Tamil Nadu did not reduce VAT.
“Many states like Maharashtra, West Bengal, Telangana, Andhra Pradesh, Tamil Nadu, Kerala and Jharkhand did not agree to our request for one reason or the other and the burden on the people of these states continues,” Modi said. 27 April.
“I am urging you that in the interest of the nation, please do the work which should have been done six months back in November. Give benefits to the consumers in your state by reducing VAT.”
For the country 85 percent dependent on imports to meet its oil needs, a rise in international crude oil prices following Russia’s invasion of Ukraine, along with food and commodities, contributed to a rise in inflation to 7.8 percent in April. Have given.
To control the rising prices, the central government reduced the excise duty.
Two reductions – first in November 2021 and again in May 2022, withholding an increase of Rs 13 and Rs 16 per liter in taxes on petrol and diesel between March 2020 and May 2020 to protect consumers from a sharp drop in international oil . prices.
The 2020 excise duty hike had taken the central tax on petrol to an all-time high of Rs 32.9 per liter and diesel at Rs 31.8 per litre.
After the latest excise duty cut, the incidents of Central tax on petrol It came down to Rs 19.9 per liter and on diesel to Rs 15.8 per liter.
Central excise duty is 20 percent of the price of petrol, which was 26 percent earlier. It is now 17.6 per cent of the price of diesel.
After considering local sales tax or VAT, the total tax on petrol price is 37 per cent and that on diesel is 32 per cent, which was 40-42 per cent earlier.
When the Modi government came to power in 2014, the excise duty on petrol was Rs 9.48 per liter and that on diesel was Rs 3.56 per liter.
Between November 2014 and January 2016, the government raised excise duties on petrol and diesel on nine occasions to offset the gains from falling global oil prices.
Overall, petrol rates were hiked by Rs 11.77 per liter and diesel by Rs 13.47 per liter in those 15 months, more than doubling the government’s excise duty from Rs 99,000 crore in 2016-17 to Rs 2,42,000 crore. helped. 2014-15.
It cut excise duty by Rs 2 in October 2017 and Rs 1.50 a year later. But it increased the excise duty by Rs 2 per liter in July 2019.
It again increased the excise duty by Rs 3 per liter on March 14, 2020. On May 6, 2020, the government again increased the excise duty on petrol by Rs 10 per liter and on diesel by Rs 13 per liter.
The central government had on May 21 cut excise duty on petrol by a record Rs 8 per liter and diesel by Rs 6 to provide relief to consumers suffering from high fuel prices, which have pushed inflation to an all-time high. At the time, it asked states to reduce VAT so that more relief could be provided. Almost no state has reduced VAT.
Announcing the bi-monthly monetary policy, Das said a quick survey of urban households conducted after the excise duty cut on petrol and diesel on May 21 showed a significant dip in their inflation expectations.
“In such a scenario, further reduction in state VAT on petrol and diesel across the country can certainly contribute to inflationary pressures as well as lower expectations,” Das said.
Finance Minister Nirmala Sitharaman had urged states to reduce VAT at the time of announcing reduction in excise duty. His other cabinet colleagues, including Oil Minister Hardeep Singh Puri, made similar arguments.
But after the announcement of reduction in excise duty on May 21, hardly any state has reduced VAT.
In April, Prime Minister Narendra Modi also asked states to reduce their taxes so that users can get the full benefit of the previous excise duty cut of November 2021. Non-NDA party ruled states did not reduce VAT.
After the November 2021 reduction in excise duty on petrol by Rs 5 per liter and on diesel by Rs 10 per liter, 25 states and union territories had cut VAT to provide further relief to consumers suffering from record-high retail prices.
However, states ruled by non-NDA parties such as Maharashtra, Andhra Pradesh, West Bengal, Kerala and Tamil Nadu did not reduce VAT.
“Many states like Maharashtra, West Bengal, Telangana, Andhra Pradesh, Tamil Nadu, Kerala and Jharkhand did not agree to our request for one reason or the other and the burden on the people of these states continues,” Modi said. 27 April.
“I am urging you that in the interest of the nation, please do the work which should have been done six months back in November. Give benefits to the consumers in your state by reducing VAT.”
For the country 85 percent dependent on imports to meet its oil needs, a rise in international crude oil prices following Russia’s invasion of Ukraine, along with food and commodities, contributed to a rise in inflation to 7.8 percent in April. Have given.
To control the rising prices, the central government reduced the excise duty.
Two reductions – first in November 2021 and again in May 2022, withholding an increase of Rs 13 and Rs 16 per liter in taxes on petrol and diesel between March 2020 and May 2020 to protect consumers from a sharp drop in international oil . prices.
The 2020 excise duty hike had taken the central tax on petrol to an all-time high of Rs 32.9 per liter and diesel at Rs 31.8 per litre.
After the latest excise duty cut, the incidents of Central tax on petrol It came down to Rs 19.9 per liter and on diesel to Rs 15.8 per liter.
Central excise duty is 20 percent of the price of petrol, which was 26 percent earlier. It is now 17.6 per cent of the price of diesel.
After considering local sales tax or VAT, the total tax on petrol price is 37 per cent and that on diesel is 32 per cent, which was 40-42 per cent earlier.
When the Modi government came to power in 2014, the excise duty on petrol was Rs 9.48 per liter and that on diesel was Rs 3.56 per liter.
Between November 2014 and January 2016, the government raised excise duties on petrol and diesel on nine occasions to offset the gains from falling global oil prices.
Overall, petrol rates were hiked by Rs 11.77 per liter and diesel by Rs 13.47 per liter in those 15 months, more than doubling the government’s excise duty from Rs 99,000 crore in 2016-17 to Rs 2,42,000 crore. helped. 2014-15.
It cut excise duty by Rs 2 in October 2017 and Rs 1.50 a year later. But it increased the excise duty by Rs 2 per liter in July 2019.
It again increased the excise duty by Rs 3 per liter on March 14, 2020. On May 6, 2020, the government again increased the excise duty on petrol by Rs 10 per liter and on diesel by Rs 13 per liter.