Shaktikanta Das pitches for tax cut on petrol, diesel

Reserve Bank Governor Shaktikanta Das has suggested a cut in indirect tax to reduce the price of petrol and diesel. At present, 60% of the retail price of petrol is tax, while diesel has 54% tax. The major part of the price of petrol is the excise duty levied by the Centre and the VAT levied by the state. The price has been continuously increasing for close to two weeks now, due to which petrol in many cities is being sold beyond Rs 100 per litre

Speaking at the MPC minutes programme, Shaktikanta Das said, ‘‘CPI inflation, excluding food and fuel, remained elevated at 5.5% in December, due to inflationary impact of rising crude oil prices and high indirect tax rates on petrol and diesel, and pick-up in inflation of key goods and services, particularly in transport and health categories,”

“Proactive supply-side measures, particularly in enabling a calibrated unwinding of high indirect taxes on petrol and diesel – in a co-ordinated manner by centre and states – are critical to contain the further build-up of cost-pressures in the economy,” he further mentioned.

Four states reduced VAT:

There are now four states in the country where governments have started giving relief to the general public by cutting VAT and other taxes. State governments in West Bengal, Assam, Rajasthan, and Meghalaya have announced a reduction in VAT on petrol and diesel. The Rajasthan government had reduced the VAT rate from 38% to 36% last month itself. Now after looking at the elections, the West Bengal government has cut the VAT on petrol and diesel by 1 rupee. At the same time, the Assam government has also removed the tax of Rs 5. The Meghalaya government has cut petrol by Rs 7.40 per litfre and diesel by Rs 7.10. Apart from this, the government has also reduced VAT on petrol and diesel by 2 rupees. After this, Meghalaya has become the state to cut the most on petrol and diesel.

Government wants money, hence tax is being collected

Earlier on Sunday, Petroleum Minister Dharmendra Pradhan said on rising prices that oil-producing countries have cut production. Due to this, the oil-importing countries are paying more. Pradhan also said that due to Corona, the budget of the government has increased significantly. In order to accelerate the economic recovery, the government capital funding. Both the Center and the state levy taxes on petrol & diesel.

State & Centre should find solution together:

Earlier on Saturday, Nirmala Sitharaman had said in an event held in Chennai that  “It’s a vexatious issue in which no answer except for fall in fuel price will convince anyone. This matter is related to both the Center and the state, so both the government should think together and solve the problem. The Finance Minister also said that the oil-producing countries have said that there is still more reduction in production.