PTR Palanivel Thiagarajan: Petrol and diesel price hike: Finance Minister PTR Sudden explanation! – not possible to reduce state tax on fuel says minister ptr palanivel thiagarajan

Tamil Nadu Finance Minister PDR Palanivel Thiagarajan has said that further reduction in the state tax on petrol and diesel is not fair or feasible.

According to a statement issued by DMK Finance Minister Palanivel Thiagarajan:
Over the past seven years, the federal government has repeatedly raised its taxes on petrol and diesel, putting a heavy burden on the people, and we have been constantly urging them to reduce the increased taxes.

As the Central Government did not listen to this, in the financial statement filed on 13.08.2021, as per the instructions of the Chief Minister, we announced a reduction of 3 rupees per liter on the state tax on petrol as a pioneer for our country to benefit the poor, simple and middle class people who use 2.63 crore two wheelers in Tamil Nadu.
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As a result, it is estimated that the state government will lose Rs 1,160 crore a year. The Government of Tamil Nadu has accepted this even in the context of the financial crisis left by the previous government.
The Reserve Bank’s Monetary Policy Committee has also called for a reduction in the federal tax hike on petrol and diesel, in view of the need to stimulate economic growth and reduce inflation caused by rising crude oil prices. Several state governments have put forward this demand.

On 3.11.2021, the Central Government reduced the central tax on petrol to Rs. 5 per liter and the central tax on diesel to Rs. 10 per liter. As Tamil Nadu levies “Ad valorem” taxes after the federal tax, it will reduce the retail price of petrol by an additional Rs 0.65 (total Rs 5.65) and the retail price of diesel by an additional Rs 1.10 (total of Rs 11.10). As a result, the state government loses about Rs 1,050 crore a year in revenue.

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The federal government has also asked state governments to further reduce state taxes on petrol and diesel. This is an unacceptable request. When buying a liter of petrol or a liter of diesel, there are several aspects in determining its retail price.

Base price (depending on crude oil and refining price), including federal excise and upper taxes / surcharges, transportation costs, state taxes and agency fees. The base price of petrol and diesel on 1.8.2014 and the global import price were net of today’s import price in rupee terms.
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The base price of petrol was Rs 48.55 per liter and the base price of diesel was Rs 47.27 per liter. On 4.11.2021, the base price of petrol was Rs 48.36 and the base price of diesel was Rs 49.69 per liter. On 1.8.2014, the United Kingdom taxes on petrol were Rs. 9.48 per liter and Rs. 3.57 per liter on diesel.

At that time, state taxes were Rs 15.47 per liter on petrol and Rs 10.23 per liter on diesel. Before the federal government reduced taxes on petrol and diesel, the federal tax on petrol was 32.90 rupees per liter and 31.80 rupees per liter on diesel. The government has reduced it to Rs 27.90 per liter on petrol and Rs 21.80 per liter on diesel.
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That is, compared to 2014 (when the base price was roughly the same) the central government is still charging an additional 18.42 rupees for petrol and 18.23 rupees for diesel. In the case of Tamil Nadu, the current state tax on petrol is Rs 21.46 per liter and Rs 17.51 ​​per liter on diesel. This is more than in 2014 (9 rupees per liter on petrol – of which we reduced 3 rupees in August and 7.25 rupees per liter on diesel)
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The Chief Minister-led government has already reduced the tax on petrol to Rs 3 per liter. This tax cut is effective from 14 August 2021. The federal government has consistently increased taxes on petrol and diesel for the past seven years. If this is reduced back to 2014 levels, state taxation will automatically fall.

This is because this tax is levied on the base price and the federal tax rate. Retail Price Details – 01 August 2014, November 2, 2021 (Before Federal Tax Deduction) and November 4, 2021 (After Tax Deduction) are as follows:

Therefore, it is neither fair nor possible for the state government to reduce the tax rate further as the federal tax rate continues to be higher. In view of this, I reiterate that the Central Government should reduce the tax on petrol and diesel to the level it was in 2014.

This is the only simple, reasonable solution that will benefit everyone. Such a move would automatically reduce state taxes (most states follow the “ad valorem” tax system).
Thus it is stated.

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