Reduction in custom duty on petrol, diesel will not affect the tax share of states: Finance Minister Sitharaman

Finance Minister Nirmala Sitharaman (File Pic)

Finance Minister Nirmala Sitharaman has rejected the opposition’s allegations that the reduction in custom duty on vehicle fuel will affect the share of states in central taxes.

Finance Minister Nirmala Sitharaman (Nirmala Sitharaman) has rejected the allegations of the opposition that vehicle fuel (Fuel) Deduction in Custom Duty on Central Taxes (tax) The share of the states will be affected. Sitharaman said on Sunday that petrol (Petrol) 8 rupees and diesel (Diesel) Rs 6 has been cut in the road and infrastructure cess levied on these fuels, the collection of which is never shared with the states. He said that in such a situation this allegation of the opposition is not true. Former Finance Minister P Chidambaram and other opposition leaders had said that the government’s announcement of reduction in excise duty on Saturday evening will reduce the share of states in central taxes.

However, later on Sunday, Chidambaram withdrew his statement, saying that the burden of cutting taxes would be borne by the central government alone.

Sitharaman explained by tweeting

Sitharaman wrote on Twitter that she is sharing useful information about taxes to be levied on petrol and diesel, which will be beneficial for all. He said excise duty on petrol and diesel is a combination of Basic Excise Duty (BED), Special Additional Excise Duty (SAED), Road and Infrastructure Cess (RIC) and Agriculture and Infrastructure Development Tax (AIDC). Basic excise duty is shared with the states whereas SAED, RIC and AIDC are not shared.

The Finance Minister said that the excise duty deduction of Rs 8 per liter on petrol and Rs 6 per liter on diesel has been done completely in RIC. In November 2021, when petrol was reduced by Rs 5 per liter and diesel by Rs 10 per liter, the deduction was made in RIC itself.

Under the centre-state tax sharing system, 41 per cent of the tax collected by the Center goes to the states. However, these do not include tax collected as levy by way of cess. Most of the tax levied on petrol and diesel is a cess.

While the central tax on petrol was Rs 27.90 per liter before Saturday’s cut, the basic excise duty was just Rs 1.40 per litre. Similarly, there was a total central tax of Rs 21.80 on diesel and the basic excise duty was only Rs 1.80. The special additional excise duty on petrol was Rs 11 per liter and Rs 8 on diesel. AIDC was Rs 2.50 per liter on petrol and Rs 4 per liter on diesel.

Additional excise duty of Rs 13 per liter on petrol was levied as RIC and such duty of Rs 8 per liter on diesel was levied. Saturday’s excise duty deduction has been done in this. The BED collection of only Rs 1.40 per liter on petrol and Rs 1.80 per liter on diesel is shared with the states.

Sitharaman said that the basic excise duty which is shared with the states has not even been touched. Therefore, the Center will bear the burden of the two deductions made in tax (first in November and second on Saturday). He told that the tax deducted yesterday will cost the Center Rs 1,00,000 crore. The tax deducted in November 2021 has cost the Center Rs 1,20,000 crore per annum. The total revenue impact of the Center will be Rs 2,20,000 crore.

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