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Centre Should Remove Cess, Surcharges On Fuel: TN Finance Minister

Tamil Nadu Finance Minister Palanivel Thiaga Rajan on Thursday urged the Centre to remove cesses and surcharges on petrol and diesel revert to the 2014 rates, an act which is fair and simple.

“We have repeatedly urged the Union government to reduce the cesses and surcharges being levied and merge them with the basic tax rates so that States get their rightful share from the proceeds of the Union taxes,” Rajan said.

He was responding to Prime Minister Narendra Modi’s call on Wednesday to states to reduce the Value Added Tax (VAT) on fuel “in the spirit of cooperative federalism”.

Modi also cited the Central government reducing petrol and diesel prices by Rs 5/litre and Rs 10/litre, respectively.

According to Rajan, since Tamil Nadu levies ‘ad valorem’ taxes which are applied after Central taxes, this move by the Cebtre will cause an additional loss of about Rs 1,050 crore in annual revenue to the state.

“Given that the Union Government’s taxes continue to be exorbitant, it is neither fair nor feasible for the State Government to further reduce taxes.”

He hoped that the Central government would heed to this reasonable request in the “true spirit of cooperative federalism”.

He said the Centre’s levies on petrol have gone up substantially in the past seven years since Modi took charge for the first time in 2014.

Listing out the basic points and the tax rates on petrol and diesel, Rajan said on August 1, 2014, the basic price was Rs 48.55 per litre for petrol and Rs.47.27 per litre for diesel.

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 Centre’s taxes were Rs. 9.48 per litre on petrol and Rs 3.57 per litre on diesel. At that time, the state government taxes were at Rs 15.67 per litre on petrol and Rs 10.25 per litre on diesel.

“Prior to the reduction of taxes on petrol and diesel by Union Government, the levy of tax, including cesses and surcharges by Union Government on petrol was Rs 32.90 per litre and Rs.31.80 per litre on diesel,” he said.