Centre to lose ₹2.20L crore in 2 duty cuts
Basic excise duty which is sharable with states has not been touched. Therefore, the entire burden of these two duty cuts (made in Nov 2021 and Saturday) is borne by the Centre NIRMALA SITHARAMAN, Finance minister
NEW DELHI: The Union exchequer will alone bear the burden of ₹2.20 lakh crore revenue loss due to the two rounds of central excise duty reductions on petrol and diesel with no implication on the shareable revenue with states, finance minister Nirmala Sitharaman said on Sunday adding that the Modi government has spent ₹91 lakh crore on developmental activities in eight years, which is 85% more than what Congress-led UPA regime spent in a decade of its rule.
“The excise duty reduction of ₹ 8/litre on petrol and ₹6/litre on diesel (effective from today) has entirely been made in Road & Infrastructure Cess (RIC). Even in November ‘21, the reduction of ₹ 5/litre in petrol and ₹ 10/litre in diesel was entirely made in RIC,” the finance minister said in a tweet.
In the scheme of revenue sharing between the Centre and states, cesses like RIC are meant for specific purposes and they do not constitute the part of the divisible pool.
Sitharaman was responding to the criticisms of the Opposition that the Saturday’s decision of reducing central levies on petrol and diesel would proportionately shrink states’ share in the central divisible pool, where 41% of the collected revenue goes to states.
“Basic Excise Duty (BED),
Special Additional Excise duty (SAED), Road & Infrastructure Cess (RIC) and Agriculture & Infrastructure Development Cess (AIDC) together constitute Excise Duty on petrol and diesel. Basic ED is sharable with states. SAED, RIC & AIDC are non-sharable,” she clarified.
“Basic ED which is sharable with states has not been touched. Therefore, the entire burden of these two duty cuts (made in November 2021 and Saturday) is borne by the Centre,” she added.
The Centre government on Saturday announced to reduce RIC on petrol and diesel from ₹13 per litre and ₹8, respectively, to ₹5 a litre and ₹2 in that order, effective from Sunday.
“Although RIC is part of the non-divisible pool, the revenue collected through this cess is utilised by the Centre in infrastructure development in states,” one government official said requesting anonymity.
The finance minister said the duty reduction made yesterday has an implication of ₹1 lakh crore a year for the Centre. “The duty reduction made in November’21 has an implication of Rs 1,20,000 cr a year for Centre. Total revenue implication to Centre, on these two duty cuts is thus ₹ 2,20,000 cr a year,” she said.
Implying that the duties and cess on auto fuel helped in providing relief to the poor and farmers, and the revenue thus generated has been used in developmental works, Sitharaman cited the Reserve Bank of India’s *RBI) data for a comparative analysis.
“RBI data shows total developmental expenditure incurred by the @PMOIndia @narendramodi Govt during 2014-22 was ₹ 90.9 lakh crore. In contrast, only ₹ 49.2 lakh crore was spent on developmental expenditure during 2004-14,” she said. “The expenditure incurred by our Govt under @PMOIndia @narendramodi includes ₹ 24.85 lakh crore spent so far on food, fuel and fertiliser subsidies and ₹ 26.3 lakh crore on capital creation. Over the 10 years of UPA, only ₹ 13.9 lakh crore was spent on subsidies,” she added.
Experts, however, said there are some indirect implications on states’ revenues even when centre reduces non-sharable excise components because the value-added tax (VAT) charged by states on petrol and diesel are ad valorem.
Accordingly, the VAT on petrol in Delhi (including VAT on dealers’ commission) on Sunday came down to ₹15.71 per litre from ₹17.13 before the tax cut, the Indian Oil Corporation (IOC) data showed.
Similarly, on diesel VAT in Delhi went down from ₹14.12 per litre to Rs ₹13.11 a litre on Sunday.