Government not in favor to cut excise duty on petrol, diesel

Government not in favor to cut excise duty on petrol, diesel

Indian Finance Minister not in favor to cut excise duty on petrol and diesel to offer relief to the common man from the rise in the prices but wants various states to cut sales tax or Value Added Tax (VAT) on fuel, one of the senior official said on Monday.

Presently, petrol price has reached to hit a 55-month high of Rs 74.50 per litre, and diesel prices have reached to Rs 65.75 per litre, refreshing calls for a cut in excise duty to ease the burden on the consumers.

Later, one of the financial minister’s Official said that if state government reduces the excise duty, which just makes the quarter of retail fuel price, it is not desirable if the government stick to the path of reducing the budgetary deficit.

He further added, “Excise duty cut would be a political call, but is not advisable if we have to stick to the fiscal deficit glide path outlined in Budget.”

The Government is on its way to reduce the fiscal deficit to 3.3 % of the gross domestic product in the current fiscal to 3.5 % last fiscal. The official also said that the “Every rupee cut on the result in the loss of Rs 13,000 crore to the government.” Also, the oil ministry has not yet asked for a cut in the excise duty.

The Official said that the States should cut VAT in order to reduce a burden on the consumer. Currently, the central government charges Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. State sales tax on VAT varies from one state to another. For example, in Delhi VAT on Petrol is Rs 15.84 per litre while it is Rs 9.68 per litre on diesel.

Presently, the Government is trying that the geopolitical tension would become stable and US shale oil will reduce the oil prices, however, this is not in favor of changing with the autonomy given to the oil PSUs to revise rates daily according to the cost.

Later the Official said, “Once we have decided on daily price revision, it is not a good thing to tinker with that either through excise or by asking oil marketing companies to absorb prices.”

All the state-owned oil companies are revising the price of the petrol since June 2017. The prices of petrol are increasing each month. Currently, petrol in Delhi costs about Rs 74.50 per litre which is highest since September 2013, while Diesel price is Rs 65.75 which is highest as compared to the past.

Between November 2014 & January 2016, the Government has raised the excise duty up to 9 times. The Government has raised the prices in order to support finances as global oil prices fell, however, then they have just reduced tax to Rs 2 in October 2017.

Apart from reducing the excise duty, central has also requested states to reduce the VAT, but only 4 states which include Gujarat, Maharashtra, Madhya Pradesh and Himachal Pradesh has decreased the rates.

According to the details, excise duty on the petrol was raised to
Rs 11.77 per litre and on diesel by Rs 13.47 per litre in the last 15 months. This step helped the Government to increase mop up to
Rs 2,42,000 Crore to Rs 99,000 in 2014-15.

We hope that the Government will focus on reducing the petrol and diesel price in the near future.