Tamil Nadu Finance Minister Palanivel Thiaga Rajan on Tuesday urged the Centre to reduce its taxes on fuel, since it had the opportunities and the resources to help the common man.
Mr. Rajan’s appeal came in response to Union Finance Minister Nirmala Sitharaman’s statement in Parliament on Monday that many State governments had not reduced their taxes on petrol and diesel, while the Union government had reduced its taxes.
“After the introduction of GST, the State’s power to levy taxes has been reduced greatly. There are not enough avenues for the State to augment its revenues. Therefore, it is the Union government which has the opportunities and resources to help the common man, and I request the Union government to reduce its taxes,” he said in a statement.
The Centre had increased taxes on petrol by ₹23.42 a litre and on diesel by ₹28.23 a litre over the past few years, while its reduction in taxes in November 2021 and May 2022 together was ₹13 on petrol and ₹16 on diesel, he pointed out. ”Though the Union government has reduced the taxes, they are still higher than the 2014 rates by ₹10.42 a litre for petrol and ₹12.23 a litre for diesel. Therefore, there is a need for the Union government to further reduce its taxes,” he said.
Mr. Rajan pointed out that even before the Union government first reduced its taxes on petrol and diesel in November 2021, the Tamil Nadu government had cut VAT on petrol by ₹3 a litre in August 2021, while the reduction of the taxes by the Union government on petrol had reduced the State taxes by ₹1.95 a litre.
So, the State taxes on petrol had reduced by a total of ₹4.95 per litre and, similarly, the reduction of taxes by the Union government on diesel had reduced the State taxes by ₹1.76 per litre, he said. The State government also provided diesel subsidy to the Fisheries and Transport departments, he pointed out.
The Union government’s levies on petrol had gone up substantially in the past seven years, he noted.
“Though the revenue to the Union government has increased by several lakh crores, there has not been a matching increase in the revenues to States. This is because the Union government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the States,” Mr. Rajan said.
The Centre’s reduction in taxes, announced in November last year, would cause an additional loss of about ₹1,050 crore in annual revenue to Tamil Nadu, he said, adding that the reduction in May 2022 would cause a further loss of ₹800 crore in annual revenue to the State.
Since the imposition of GST on essential food items will adversely affect the common man, the government of Tamil Nadu had sent its objections through a letter, he recalled. “The decision regarding the imposition of taxes is being taken in three stages. The recommendations on tax impositions were placed in the GST council (i.e the third stage) for taking a decision. There are inherent issues in the basic structure and design of the GST council,” he said.
The Union government has a voting right of 33%, and all the other States have 2% each, irrespective of whether they are big or small. “In such a structure, if any decision regarding GST tax imposition is to be stopped by the State government, it requires the full support of 25 States or the support of the Union government,” Mr. Rajan said.
Tamil Nadu’s share of the national population stood at 6.21%, and its share of the GDP was 9.16%, he pointed out, and further said: “However, the State gets only 4.079% as devolution from Central taxes. Tamil Nadu did not get its due share in successive Finance Commissions, and the share of the State has continually decreased.”
