CHENNAI: Tamil Nadu Finance Minister Palanivel Thiaga Rajan on Friday once again turned down the Union Government’s request to slash State taxes on petrol and diesel in conjunction with the recent reduction of taxes by the former. Terming the request as unreasonable, he urged the Centre to reduce the levy of taxes on petrol and diesel to 2014 rates.
“While the Union’s taxes continue to be exorbitant, it is neither fair nor feasible for the State to further reduce taxes. The sole, simple, and fair approach to improve the situation for all is for the Union to reduce the levy of taxes on petrol and diesel to the rates prevailing in 2014. Such a move will automatically reduce States’ taxation (as almost all States follow ad-valorem),” he said in a statement.The Minister’s explanation assumes significance in the wake of demands from opposition parties, particularly the AIADMK.
He said the Centre had failed to accept the requests of States in the past seven years to reverse the increase of taxes. However, TN was among the few States in the country to reduce the tax by Rs 3 per litre on petrol, to benefit the low and middle-income users who own 2.63 crore two-wheelers in the State. The estimated loss to the government was around Rs 1,160 crore per annum.
Rajan said on November 3, the Union announced a reduction of Rs 5 per litre on petrol and Rs 10 per litre for diesel. Since TN levies “ad valorem” taxes after Union taxes, this move by the Union would cause an additional reduction in the pump price of petrol by Rs 0.65 (Rs 5.65 total ), and diesel by Rs 1.10 (Rs 11.10 total) in TN, and will result in a loss of Rs 1,050 crore in revenue to the State annually.
Explaining that when buying a litre of petrol and diesel, there are many components that drive the final pump price – Basic price (based largely on crude oil and refining costs), Union excise and cesses/surcharges on the basic price, transportation costs, State government taxes and dealer’s Commission, Rajan pointed out that on August 1, 2014, the basic price of petrol and diesel and the global import prices were in line with the current import prices in rupee terms.
“The basic price was Rs 48.55 per litre for petrol Rs 47.27 per litre for diesel. On November 4, the basic price of petrol was Rs 48.36 per litre while that of diesel was Rs 49.69 per litre. On August 1, 2014, the Union Government taxes were Rs 9.48 per litre on petrol and Rs 3.57 per litre on diesel. At that time, the State Government taxes were Rs 15.47 per litre on petrol and Rs 10.23 per litre on diesel,” the Minister recalled.
Prior to the reduction of taxes on petrol and diesel by the Centre, the tax on petrol was Rs 32.90 per litre, and was Rs 31.80 per litre on diesel. This has currently been reduced to Rs 27.90 per litre for petrol and Rs 21.80 per litre for diesel. “So, when compared to 2014, the Union Government still levies an additional tax of Rs 18.42 per litre for petrol and Rs 18.23 per litre for diesel,” he pointed out.
In TN, the State government currently levies a tax of Rs 21.46 per litre on petrol and Rs 17.51 per litre on diesel. The additional taxes (of Rs 9 per litre on petrol, which was reduced by Rs 3 in August, and Rs 7.25 per litre on diesel) relative to the 2014 level were imposed by the previous AIADMK government.
Tax on petrol price was reduced Rs 27.90/litre
Prior to the reduction of taxes on petrol and diesel by the Central government, the tax on petrol was Rs 32.90 per litre, and was Rs 31.80 per litre on diesel. This has currently been reduced to Rs 27.90 per litre for petrol and Rs 21.80 per litre for diesel