CHENNAI: Living up to its promise, the DMK government said the effective tax rate on petrol would be reduced by Rs 3 per litre. However, this would cause a revenue loss of Rs 1,160 crore per year.
“The rate is being reduced based on instructions from Chief Minister MK Stalin,” Finance Minister Palanivel Thiaga Rajan said while presenting the Budget on Friday. With this, the cost of petrol might go below Rs 100 in some parts of the State.
Tamil Nadu Petroleum Dealers Association president KP Murali welcomed the move, saying, “The government knows this will bring relief to poor and middle-class families amid the pandemic.” He added that 80 per cent of petrol is consumed by two-wheelers in the State, and if diesel prices were reduced, the benefit would have gone to commercial establishments and not directly to the people.
Interestingly, a couple of months ago, the finance minister was against reducing the value added tax (VAT) on fuel. The RBI observed in 2019 that the share of cess and surcharge in the Centre’s gross tax revenue (GTR) increased from 2.3 per cent in 1980-81 to 15 per cent in 2019-20, said PRS Legislative Research, an independent research institute. “This implies that of the total GTR the Centre collects, the part that is not required to be shared with States has increased,” it observed.
Between 2012 and 2020, the Centre’s cess and surcharge revenue nearly doubled from 0.9 to 1.7 per cent of the GDP. In comparison, GTR declined from 10.4 to 9.9 per cent of the GDP between 2012-13 and 2019-20. This implies that while the cess and surcharge component has significantly increased, the tax component of GTR (which is shared with States) has not seen a similar increase.