NEW DELHI: Despite the government cutting taxes on petrol and diesel in November 2021, the excise duty collection in FY22 may not fall short of the previous year’s collection of Rs 3.9 lakh crore. As of February 2022, the government has collected Rs 3.33 lakh crore in excise duty, 6% more than the collection in the same period a year ago. In the 11-month period ending February 2021, the government had collected Rs 3.14 lakh crore.
The Centre had reduced excise duty on petrol (by Rs 5 a litre) and diesel (by Rs 10 a litre) in November 2021. Over 95% of the excise duty collected from petroleum goods as they are still not in the ambit of GST.The monthly collection did come down after the reduction in November. Till November 2021, the government was collecting more than Rs 30,000 crore every month – with November collection touching Rs 38,000 crore. However, ever since, the monthly collection has been averaging around Rs 29,500 crore.
In February, the government collected Rs 29,400 crore. “The cut in excise duty dampened the growth in gross tax revenues despite high growth in direct taxes,” says Aditi Nayar, chief economist at ICRA.It is to be noted that the government had raised excise duty by Rs 13 a litre on petrol and Rs 16 on diesel at the time of pandemic when in 2020-21, when crude oil prices had crashed below $40 a barrel in mid-2020. This resulted in the excise duty collection jumping from Rs 2.40 lakh crore in 2019-20 to Rs 3.90 lakh crore in 2020-21.But given that the international crude oil prices are trading around $105 a barrel, the government may have to reduce taxes on petroleum products, which may impact its revenues in 2022-23.
A similar cut (as in November 2021) would reduce excise duty collections by 0.4-0.5% of GDP, estimates Nomura. “As of now, the government has resisted cutting excise taxes due to oil price volatility; however, if high oil prices sustain, then a cut could be announced sometime during the next one-two quarters,” it says.Meanwhile, the government on Saturday increased the prices of petrol and diesel by 80 paise each. This is the 10th such increase over the past 12 days. And, more increases are likely.