Gasoline and diesel prices vary from state to state and even city to city. Indeed, various taxes are imposed on fuel, both at central and state level.
The COVID-19 review meeting with chief ministers on Wednesday turned into a fight between the Center and the states, when Prime Minister Narendra Modi raised the issue of rising fuel prices and asked States to reduce value-added tax (VAT) on fuel “in the spirit of cooperative federalism”.
During his meeting, Prime Minister Narendra Modi listed gasoline and diesel prices in cities and pointed out that states that had lowered VAT had lower fuel prices compared to others.
“I am not criticizing anyone, but I am calling on Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand, Tamil Nadu to reduce VAT now and give benefits to people,” he said. said the Prime Minister, adding: “I appeal to you for the welfare of your people, in the national interest, please reduce VAT for the benefit of your people. What had to be done has not been done, but please cooperate now.
#LOOK | The Center reduced excise duties on fuel prices last November and also called on states to reduce taxes. I am not criticizing anyone but I am asking Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand, TN to reduce VAT now and give benefits to people : PM Modi pic.twitter.com/IPIuOJyTGK
— ANI (@ANI) April 27, 2022
After the meeting, some states hit back at Prime Minister Narendra Modi. Both Uddhav Thackeray and Mamata Banerjee slammed Modi, saying his statement was “misleading”.
In that context, we present this simple guide explaining why fuel prices vary from state to state, and why the Center and the states have often clashed over the issue.
Fuel prices in India fluctuate monthly or even daily due to external factors such as global crude oil prices. Internal factors such as taxes and dealer commissions also impact the price of domestic gasoline.
Another notable fact is that gasoline and diesel prices vary from state to state and even city to city. For example, petrol in Delhi retails at Rs 105.41 per liter on Thursday, while in Mumbai it costs Rs 120.51. Similarly, the price of diesel is Rs 95.87 per liter while it costs Rs 104.77 in the financial capital.
This difference in retail fuel prices in two cities is due to the different tax rates levied by the respective state governments on the same products.
It is also important to note that fuel tax does not fall under the Goods and Services Tax (GST).
Gasoline and diesel taxes are divided into several components at the state and central level. At the Centre, while some taxes are fixed, others are ad valorem, meaning the tax is imposed as a share of the price of the commodity.
Similarly, state taxes are also a mixture of ad valorem and fixed taxes. In many states, ad valorem taxes have an upper limit, which means that even when prices increase beyond one point, taxes do not increase.
How much do States and Center earn from fuel?
Gasoline and diesel are two of the highest taxed products in the country and bring huge revenues to the central and state governments.
Finance Minister Nirmala Sitharaman had told Rajya Sabha last year that the Center had earned around Rs 8 lakh crore from taxes levied on petrol and diesel over the past three financial years. Out of the total amount, more than Rs 3.71 lakh crore was collected in 2020-21 itself.
To better understand how fuel is taxed in India, the Stats of India Twitter account had released in March this year the amount of tax paid for Rs 100 of fuel in various states of India.
Government data compiled by Stats of India showed that in seven states half of the price of petrol is collected as tax. This includes Maharashtra at Rs 52.5, Andhra Pradesh at Rs 52.4, Telangana at Rs 51.6, Rajasthan at Rs 50.8, Madhya Pradesh at Rs 50.6, Kerala at Rs 50 .2 and Bihar at Rs 50.
The data showed that the states/union territories with the lowest taxes are Andaman and Nicobar Islands and Lakshadweep, Puducherry, Meghalaya, Mizoram and Arunachal Pradesh.
What did Modi say?
The issue of fuel taxes was raised on Wednesday when Prime Minister Narendra Modi accused some states of doing ‘injustice’ to the people by not reducing petrol and diesel taxes at the COVID review meeting. -19.
He called on the states of Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand and Tamil Nadu on the matter and added that he did not wish to engage in a debate on the income from these states in the past. six months, but just wanted people to get benefits.
However, Modi’s statements did not sit well and quickly became a flashpoint. Maharashtra Chief Minister Uddhav Thackeray said the Center owes the state Rs 26,500 crore and also alleged that the Modi government gave Maharashtra mother-in-law treatment, according to a PTI report.
“The Union government owes Rs 26,500 crore to the Maharashtra government. Maharashtra’s contribution to direct tax collection nationwide is 38.3% and its share in GST (collection) is 15%, but the Center gives us mother-in-law’s treatment, Thackeray said in a communicated.
“I am sharing the details with the public out of concern. Maharashtra receives 5.5% of the total Central Taxes on various items. If VAT and Central Taxes are combined, Maharashtra collects the maximum amount in the country, he said. -he declares.
“Despite being the major contributor, Maharashtra is neglected by the Union government,” the chief minister said.
Thackeray also indicated that on a liter of diesel sold in Mumbai, the Center gets Rs 24.38, while the state gets Rs 22.37. The same share on a liter of gasoline sold in Mumbai is Rs 31.58 and Rs 32.55, respectively, he said.
West Bengal Chief Minister Mamata Banerjee also criticized the prime minister, saying his remarks were misleading. “Today’s interaction with Prime Minister Narendra Modi was completely one-sided and misleading. The facts shared by him were false. We have provided a subsidy of Re 1 on every liter of petrol and diesel for the past three years. We have spent Rs 1,500 crore on this,” Banerjee said speaking to reporters at the State Secretariat as quoted by PTI.
With contributions from agencies
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