The Tamil Nadu government on Friday ruled out a further reduction in taxes in prices of petrol and diesel and suggested that the Centre reduce the 'exorbitant' levy on them to that prevailing in 2014 to improve the situation as all states follow ad-valorem taxation. "The simple and fair approach by the Centre would be to reduce the levy of taxes on petrol and diesel to the rates that were prevailing in 2014. Such a move will automatically reduce States' taxation as almost all states follow ad-valorem taxation", State Minister for Finance and Human Resource Management Palanivel Thiaga Rajan said in a detailed statement. Attacking the Centre, he said over the last seven years, it had repeatedly raised taxes on petrol and diesel, placing a heavy burden on the people and his government had been continuously urging them to reverse the increase in taxes.
"Though the Union government remained unmoved, we were the first state in the country to announce a reduction of tax of Rs three per litre for petrol in the budget presented on August 13, as directed by Chief Minister (M K Stalin)", he said. The move was done to benefit low and middle-income users who own 2.63 crore two-wheelers in the state and estimated loss of reduction in prices was Rs 1,160 crore annually.
The Reserve Bank of India also urged the Centre to reduce taxes on petrol and diesel as a stimulus for economic growth, following which the Centre announced a tax reduction of Rs 5 per litre on petrol and Rs 10 per litre for diesel, he said "Since Tamil Nadu levies 'ad valorem' taxes after Union taxes, this move by the Union government will (further) cause an additional reduction in the pump price of petrol by Rs 0.65 (Total of Rs 5.65) and diesel by Rs 1.10 (total of Rs 11.10) in Tamil Nadu and result in a (further) loss of Rs 1,050 crore revenue every year", he said. The finance minister also described the Centre's request to further reduce state taxes on petrol and diesel as "not a reasonable request" and added that many components drive the final price of fuel sold at the fuel outlets.
"On August 1,2014, the basic price of petrol and diesel and the global import prices were in line with the current import prices in Rupee terms. On November 4, 2021 the basic price of petrol was Rs 48.36 per litre while that of diesel was Rs 49.69 per litre. On August 1, 2014, the Union government taxes were Rs 9.48 per litre on petrol and Rs 3.57 per litre on diesel", he said. The state taxes on fuel in August 2014 was Rs 15.47 per litre on petrol and Rs 10.23 per litre on diesel, he said. He charged that the Centre, even after reducing the taxes in fuel prices (in November), still levies an additional tax of Rs 18.42 per litre for petrol and Rs 18.23 per litre for diesel.
Tamil Nadu currently levies tax of Rs 21.46 per litre on petrol and Rs 17.51 per litre on diesel, Rajan said, adding the government already reduced the tax on petrol by Rs three per litre, effective August 14, 2021. The Union government has repeatedly increased the levy of tax on petrol and diesel over the last seven years. If it were to reduce the taxes to 2014 rates, the state tax – levied as an "ad-valorem" tax on the sum of basic price and union government levy, will automatically reduce, he said.
"While the union government's taxes continue to be exorbitant, it is neither fair nor feasible for the state government to further reduce taxes. I reiterate that the sole, simple and fair approach to improve the situation for all, is for the union government to reduce the levy of taxes on petrol and diesel to the rates prevailing in 2014", he said. Such a move would automatically reduce States' taxation as almost all States follow ad-valorem taxation, he added.
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