By Our Special Correspondent
Finance minister Nirmala Sitharaman on Sunday clarified that the excise duty cut of ₹8 per litre on petrol and ₹6 per litre on diesel has entirely been made in the Road and Infrastructure Cess (RIC) – which is not shareable with states.
The Centre’s taxes on petrol and diesel include BED, special additional excise duty, road & infrastructure cess, and agriculture & infrastructure development cess. Of these, only BED is part of the divisible pool of taxes, and hence needs to be shared with states as per the Finance Commission formula, under which states’ share in the pool is 42%.
Excise duty on petrol and diesel has four components Basic excise duty, special additional excise duty (SAED) Road and Infrastructure Cess (RIC) and Agriculture and Infrastructure Development Cess (AIDC). Basic excise duty is sharable but SAED, RIC and AIDC are non-sharable so states will not suffer any revenue loss, Sitharaman tweeted.
But it may be noted that since states’ taxes are mostly ad valorem and levied on the base, including the Centre’s taxes (all volume-based), the Centre’s tax cut has a direct impact on states’ revenues. For example, as a result of Saturday’s excise cut, Kerala will lose Rs 2.41/litre on petrol and Rs 1.36/litre diesel, while Rajasthan will lose Rs 2.48/litre on petrol and Rs 1.16/litre on diesel.
In a series of tweets, Sitharaman, citing RBI data, said that the Narendra Modi government incurred developmental expenditure worth ₹90.9 lakh crore during 2014 to 2022. “In contrast, only ₹49.2 lakh crore was spent on developmental expenditure during 2004-2014,” she said.
Meanwhile Maharashtra on Sunday also cut value added tax VAT on petrol (by Rs.2.08) and diesel (Rs.1.44). Kerala had on Saturday cut the state tax on petrol and diesel by Rs.2.41 and Rs.1.36, respectively. Rajasthan will reduce VAT by Rs.2.48 on petrol and Rs. 1.16 on diesel.
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