Indian Govt Centre fully bears fuel tax cut burden

(The Hindu) Indian Union Finance Minister Nirmala Sitharaman, on Sunday, said that the entire duty reduction in petrol and diesel announced on Saturday (21) has been done out of the Road & Infrastructure Cess (RIC) component of the taxes levied on petroleum products so the entire burden of the tax cuts will be borne by the Centre.

Allaying concerns that the duty cuts will lower the devolution of taxes to States, Sitharaman said that the basic excise duty on petro products, which is sharable with States has not been touched.

The Union Minister's remarks come on the back of some States and Opposition leaders criticising her exhortation that they should follow up these duty cuts by slashing State-level levies on fuel products.

Former Finance and Home Affairs Minister P. Chidambaram pointed out that the situation for States was akin to being between “the devil and the deep sea”, as they are getting very little by way of share of petroleum duties.

“Their revenue is from VAT on Petrol and Diesel… I wonder if they can afford to give up that revenue unless the Centre devolved more funds or gave them more grants,” he noted.

Tamil Nadu Finance Minister Palanivel Thiaga Rajan reacted by stating that the Union Government didn't inform or ask States' views while increasing central taxes on Petrol by about ₹23 a litre (+250%) and by around ₹29 a litre (+900%) on diesel since 2014. "Now, after rolling back ~50% of their increases, they're exhorting States to cut," he said in a tweet, stressing it was an unfair and unreasonable expectation.