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Chidambaram hits out at minister over VAT cut request on fuel prices. Then admits mistake
Petrol and diesel prices: Union finance minister Nirmala Sitharaman had encouraged the state governments to reduce VAT on petroleum products after Centre's cut on excise duty.
Former Union minister P Chidambaram on Sunday admitted that the facts regarding the tax cuts on fuel prices announced by the central government are “contrary” to what he had claimed earlier. On Saturday, Union finance minister Nirmala Sitharaman announced a ₹8 per litre cut in excise duty on petrol and ₹6 a litre on diesel to rein in the soaring fuel prices owing to the surge in international crude oil prices amid Russia's war on Ukraine.
The minister also urged states to reduce VAT on petroleum products to give relief to the common man.
"I wish to exhort all state governments, especially the states where reduction wasn't done during the last round (November 2021), to also implement a similar cut and give relief to the common man," she added.
Chidambaram, taking a critical view of the price cuts and Sitharaman’s request to states to follow the suit, said that the finance minister’s exhortation to states is “meaningless” as 41 paise of a rupee in “central excise” belong to the states.
“It means that Centre has cut 59 paise and the States have cut 41 paise. So, dont point fingers,” he wrote on Twitter. “The true cut will be if the Centre cuts from the cess it levies on petrol and diesel (which is not shared with the states)”
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On Sunday, the senior Congress leader clarified that Sitharaman had used the words “excise duty” while announcing the tax cuts, but the reduction was in additional excise duty, which is not shared with the states.
“Hence, contrary to what I said yesterday, the entire burden of the reduction falls on the Centre. To that extent, I stand corrected,” he tweeted.
He, however, argued that the states are “getting very little by way of share of duties” on fuel as their revenue is from VAT on petrol and diesel.
“I wonder if they can afford to give up that revenue unless the Centre devolved more funds or gave them more grants,” he added.
