Excise duty cut on petrol, diesel: Here's what the CBIC Chairman has to say

New Delhi: The government will look to reduce prices of petrol and diesel through a cut in taxes when the time comes, the head of the agency responsible for excise and other indirect tax collections said on April 13.

Record excise duty on petrol and diesel helped indirect tax collections rise by more than 59% in the fiscal year ended March 31 (2020-21) when compared to the previous year.

“We are very hopeful that revenue in the coming months is going to be very strong,” Central Board of Indirect Taxes and Customs (CBIC) Chairman M Ajit Kumar said over a video call with journalists to give out tax collection numbers.

“As far as reduction in fuel prices are concerned, it is a matter that is being looked into constantly and I am as sure as and when the time comes, a view will be taken on that,” he said.

He was asked if the government was considering reducing excise duty on petrol and diesel to give relief to consumers. He, however, did not elaborate on the timing.

The government last year raised excise duty on petrol by Rs 13 per litre and that on diesel by Rs 16. Excise duty on petrol now totals Rs 32.90 a litre and makes up for 36% of the Rs 90.56 a litre retail selling price of the fuel in Delhi.

Excise duty on diesel totals Rs 31.80 and makes up for 39% of the retail selling price of Rs 80.87. Together with state VAT, taxes make up for 55-60% of the price that consumers pay.

Petrol prices crossed Rs 100-mark in some places in Rajasthan, Maharashtra and Madhya Pradesh in February as international oil soared. But as soon as elections to five states including West Bengal, Tamil Nadu and Kerala were announced, the prices hit a freeze button.

And they declined a bit when international prices dipped on worries about demand recovery amid a resurgence of Covid infection. Petrol had hit an all-time high of Rs 91.17 a litre in Delhi in February and diesel touched a record Rs 81.47.

CBIC member (Budget) Vivek Johri said a 59.2 per cent growth in excise collections is partly “explained by an increase in the rate of tax”.

“If there is a cut that will have an impact on revenue collection from excise,” he said.

Also, there has been a dip in consumption as states imposed partial lockdowns to curb the spread of coronavirus infection.

“Because of Covid, you would have seen recent reports of a dip in consumption of petroleum products, particularly diesel, motor spirits (petrol) and other fuels. So revenue will be a function of where the rates settle, if at all there is a change in the rates, and the level of consumption that we see in the economy,” he said.

Last month, Oil Minister Dharmendra Pradhan had told Parliament that the tax collected on petrol and diesel was Rs 52,537 crore in 2013, which rose to Rs 2.13 lakh crore in 2019-20 and swelled further to Rs 2.94 lakh crore in the first 11 months of 2020-21 fiscal.

The CBIC did not separately give excise collection on petrol and diesel for 2020-21 fiscal.