States hit back over govt’s appeal to reduce fuel VAT

The response came after Modi urged states to cut Value Added Tax (VAT) on fuel in “national interest”, a remark he made during a videoconference with chief ministers meant to discuss Covid-19.
Bihar chief minister Nitish Kumar attends a meeting with Prime Minister Narendra Modi through video conferencing at 1,Anne Marg in Patna, Bihar, India on Wednesday, April 27, 2022: (Photo By Santosh Kumar/Hindustan Times)
Bihar chief minister Nitish Kumar attends a meeting with Prime Minister Narendra Modi through video conferencing at 1,Anne Marg in Patna, Bihar, India on Wednesday, April 27, 2022: (Photo By Santosh Kumar/Hindustan Times)
Updated on Apr 28, 2022 05:48 AM IST
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By, New Delhi

Parties in power in states singled out by Prime Minister Narendra Modi for not reducing levies on fuel hit back on Wednesday, accusing the PM of being disingenuous and alleging that the Union government was instead the one fleecing citizens by levying a variety of taxes and cesses.

The response came after Modi urged states to cut Value Added Tax (VAT) on fuel in “national interest”, a remark he made during a videoconference with chief ministers meant to discuss Covid-19 and the recovery from the pandemic.

The PM named Maharashtra, West Bengal, Telangana, Andhra Pradesh, Tamil Nadu, Kerala for not having reduced VAT since November, when the central government had cut the excise on petrol and diesel. All of these states are ruled by rivals of the Prime Minister’s Bharatiya Janata Party. Modi said levies must now be cut further to lower the burden on the people who are reeling under high inflation.

“The Prime Minister gave a one-sided speech. It was misleading and incorrect. We (chief ministers) didn’t have the scope to counter. We could only watch and hear him. We don’t agree with him and we demand [the Cetntre] reduce the prices of fuel,” Bengal chief minister Mamata Banerjee told reporters at the state secretariat in Kolkata after the meeting.

“The slashing of excise duty on fuel in last November was just eyewash. The Centre imposed multiple cesses -- from agriculture cess to education cess. The states don’t get any share. And now, you are blaming the states to portray yourself as saints,” she added.

Telangana state finance minister, T Harish Rao, alleged that it was the Centre that was “fleecing” fuel consumers in the name of special excise duty, additional excise duty and road cess.

“Except in 2015, when the VAT was rounded off to the nearest rupee, the Telangana government has not increased any tax on fuel. On the other hand, the Modi government has earned 24 lakh crore in the form of cess from consumers in the last seven years. Telangana is supposed to get 54,000 crore as its share, but the Centre has denied the same in the name of cess,” Rao said.

He said the Telangana government was demanding abolition of cesses and that all excise duties be brought under divisible pool.

After the virtual meeting, Maharashtra chief minister Uddhav Thackeray’s office issued a statement detailing the Centre and the state government’s share of taxes on fuel. The Centre gets 24.38 on a litre of diesel sold in Mumbai, while the state receives 22.37, the data said. In the case of petrol, Centre’s share was 31.58 and state’s 32.55. “It is not correct that prices of petrol and diesel are going up because of the state government’s VAT,” Thackeray stated.

Jharkhand and Punjab called for bringing fuel under the Goods and Services Tax (GST) regime.

Jharkhand health minister Banna Gupta described the meeting with the PM as “political” and said it laid emphasis on fuel prices rather than the Covid-19 situation. “60% of the time (in the meeting) was spent on petrol and diesel rather than on the Covid-19 situation. The Centre should put petrol and diesel under the GST regime, which will give instant relief to people from the spiralling fuel prices,” said Gupta.

The Hemant Soren-led government has refused slashing rates, arguing it has not hiked prices since it came to power in December 2019.

Kerala finance minister TN Balagopal rejected PM Modi’s appeal and blamed him for creating an impression that states are behind recurring price hike on petroleum products.

“The PM’s statement creates enough misunderstanding and gives an impression that states are behind recurring price hike of petroleum products. States are not getting their due and even the cess and surcharge are pocketed by the Centre. GST backlog is also quite high,” he said, adding that the state had no plans to cut VAT on petroleum products.

“GST has already deprived states of taxing rights. Petrol and alcohol are two remaining items where the states have some power. The Union government should explain how states can continue like this. The PM’s statement was not in good spirit of federal polity of the country,” he said.

The Aam Aadmi Party (AAP)’s Punjab unit chief spokesperson, Malwinder Singh Kang said: “The Centre has increased the tax on petroleum products by 250% in the last five years. State governments cannot impose any additional taxes. The central government should, therefore, lend a helping hand in reducing prices”.

In November 2021, the then Congress government had slashed the value-added tax (VAT) on petrol and diesel, making them cheaper in the state by 10 and 5 per litre, respectively.

Odisha finance secretary Vishal Dev said the state government would soon take a decision on reducing VAT on fuel.

(With inputs from Kolkata, Hyderabad, Mumbai, Ranchi, Chandigarh, Bhubaneswar and Thiruvananthapuram and Chennai)

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Sunday, June 26, 2022