It was a gathering with chief ministers of states on the Covid-19 situation within the nation. However, Prime Minister Narendra Modi brought up a reasonably sensitive subject with regards to Centre-state relations: fuel costs.
Calling out Opposition-ruled states by title, Modi on Wednesday mentioned some states didn’t scale back the value-added tax (VAT) on petrol and diesel regardless of the excise responsibility cut by the Centre final November and did “injustice” to the individuals by not transferring the advantages of the transfer to them.
“Some states reduced taxes but some states did not give any benefit of this to the people. Due to this, the prices of petrol and diesel in these states continue to remain high. In a way, this is not only injustice to the people of these states but it also has an impact on neighbouring states,” he mentioned.
Modi mentioned that many states like Maharashtra, West Bengal, Telangana, Andhra Pradesh, Tamil Nadu, Kerala and Jharkhand didn’t scale back VAT or state tax after the Centre cut down its personal excise duties. The Prime Minister mentioned 42 per cent of the Centre’s income goes to state governments. “I urge all the states to work as a team in this time of global crisis (high oil prices due to the war in Ukraine) following the spirit of cooperative federalism.”
He mentioned states like Karnataka and Gujarat took tax discount measures for the welfare of individuals, regardless of income loss, whereas their neighbouring states earned income by not slashing tax. “I request that what should have been done in November, do it now. You should pass on the benefit to the citizens by reducing VAT,” Modi informed Opposition states.
As Russia’s invasion of Ukraine enters its third month, benchmark Brent and WTI crude stay above the $100-a-barrel mark.
Reactions have been swift.
According to information company studies, West Bengal Chief Minister Mamata Banerjee accused Modi of favouring BJP-ruled states by giving them “50 per cent more” cash for welfare schemes. “He left the matter of rising prices of petrol, diesel and domestic gas to the states, that states will have to slash prices. How will states do that? You increased prices. Did you see your income? You said one-sided things to people,” Banerjee was quoted as saying.
Data compiled from public sources by Business Standard exhibits that in absolute phrases, it’s certainly a non-BJP state (Maharashtra) that garners probably the most from the sale of petroleum merchandise. BJP-ruled Uttar Pradesh has the second highest collections (see chart).
Opposition states like Telangana and Kerala do have some of the very best duties on petrol and diesel. However, even BJP-ruled states, lots of which cut charges in line with the Centre in November, have some of the very best VAT or gross sales tax charges.
For instance, Assam costs 32.66 per cent VAT on petrol and 23.66 per cent on diesel, whereas Madhya Pradesh costs 29 per cent plus Rs 2.5 a litre VAT apart from 1 per cent cess on petrol; and 19 per cent plus Rs 1.5 per litre VAT plus 1 per cent cess on diesel.
In November 2021, the Centre had cut excise duties on petrol and diesel by Rs 5 and Rs 10 a litre, respectively. Among the BJP states, Uttar Pradesh had cut VAT by Rs 12 per litre total; Gujarat had in March 2022 cut VAT on petrol and diesel by 4.5 per cent and seven.5 p.c, respectively; and Karnataka had, final November, cut petrol and diesel VAT by round 9 per cent.
Opposition state Tamil Nadu had cut petrol costs by Rs 3 per litre final August.