States won’t lose revenue after tax cut: Finance Minister Nirmala Sitharaman

NEW DELHI:  A day after the Union government slashed central excise duty on fuel, Finance Minister Nirmala Sitharaman on Sunday said its entire burden will be borne by the Centre as the reduction has been made in the Road and Infrastructure Cess, which is not shared with the states.

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 with states but SAED, RIC & AIDC are non-sharable, so states will not suffer any revenue loss, Sitharaman said in a series of tweets.

“The excise duty reduction of Rs 8/litre on petrol and Rs 6/litre on diesel (effective from today) has entirely been made in Road & Infrastructure Cess (RIC). Even in November ’21, the reduction of Rs 5/litre in petrol and Rs 10/litre in diesel was entirely made in RIC,” she added. 

Sitharaman also juxtapose the development expenditure incurred by the Modi government so far (2014-2022) as against the UPA (2004-2014), saying the figures were Rs 90.9 lakh crore and Rs 49.2 lakh crore, respectively. The Modi government spent Rs 24.85 lakh crore on food, fuel and fertiliser subsidies and Rs 26.3 lakh crore on capital creation, while only Rs 13.9 lakh crore was spent on subsidies during UPA rule, she said.

Meanwhile, Maharashtra on Sunday joined the list of a few states that 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. 

Centre to take Rs 2.2 lakh crore hit in a year

Saturday’s excise duty cut would cost the Centre Rs 1 lakh crore per annum. Revenue implication of the duty cut in November 2021 was Rs 1.2 lakh crore. So, total revenue loss is Rs 2.2 lakh crore, Sitharaman said.