Govt to take Rs 10,500 crore hit due to Rs 1.5 excise duty cut

The central government will bear a revenue loss of around Rs 10,500 crore due to today’s cut in excise duty on petrol and diesel prices. The government has reduce the central excise duty levied on petrol and diesel by Rs 1.50. The consumers, however, will see an effective drop of Rs 2.50 in fuel prices since the government has asked the oil marketing companies to cut another Re 1 per litre.

Govt to take Rs 10,500 crore hit due to Rs 1.5 excise duty cut

“Centre’s revenue collection is intact due to expansion of tax base not due to rate hike. The total impact of the excise duty cut on us for the entire fiscal would have been Rs 21,000 crore. Since this will be applicable only for around half the fiscal, the decision will put a burden of Rs 10,500 crore on us, which is only 0.05 per cent of the fiscal deficit. Absrobing this burden of Rs 10,500 crore while maintaining the fiscal deficit target, I am confident will not be a problem with the increased collections,” Jaitley said.

Justifying the minimal relief in fuel prices, Jaitley said “We have to react to the situation and give relief without impacting the fiscal deficit. We cannot do it at the cost of financial position and give it when it can absorb it.”

The Centre currently levies a total excise duty of Rs 19.48 per litre on petrol and Rs 15.33 per litre on diesel. VAT varies amongst states. The Central government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances even though the global oil prices fell.

As per the Congress party, the centre has increased excise duty by over 300 per cent in the past three years. The deal commission comes out to be around Rs 3.66, while VAT varies among states. For Delhi, VAT on petrol, including VAT on dealer commissioner, is around Rs 17.80.

Experts believe Rs 2.5 cut is nothing but a token relief. Market analysts also say the government is playing to the gallery by cutting fuel by a minimal margin at a time petrol and diesel have been increased by Rs 5.17 and Rs 4.83 respectively, in the past one month alone.


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