Thursday, May 26, 2022

It's not about now.

The central government in India cut excise duty on petrol by Rs 8 and by Rs 6 on diesel to reduce fuel prices at the pump, TOI, and try to control the inexorable rise in inflation. Following the Center's action, various states announced cuts in VAT on fuel, news18. States have not actually cut taxes on fuel, wrote Prof KV Subramanian. "Decreases in VAT in these states are an inevitable outcome of the Centre's cut in excise duty. As petrol and diesel are not included in the GST, the consumer pays state taxes even on central tax." While the central government tax on fuel is Rs 24 per liter for all states, taxes in Maharashtra amount to Rs 31.1 per liter, 257% higher than Rs 12.1 per liter in the neighboring state of Gujarat. On the other hand, "The quantum of funds transferred from the Centre to various implementing agencies in Gujarat, including private trusts, academic institutions and individuals, that did not reflect in the state's annual finance accounts, has increased 350 percent since 2015, noted the Comptroller and Auditor General of India (CAG)," TIE. 2015 was the year when the average price of crude oil fell from over $100 per barrel to $58.89 per barrel, The Balance, and the central government increased excise duty on fuel to rake in windfall taxes. "Look at it this way - since 2014, the central government under PM Modi has collected Rs 18.23 lakh crore (Rs 18.23 trillion) by levying excise duty on petroleum products. In the same period, state governments have collected Rs 14.26 lakh crore (Rs 14.26 trillion) from VAT/Sales Tax on the same products," wrote Subodh Varma. As per the 15th Finance Commission, "The share of states in the central taxes for the period of 2021-26 period is recommended to be 41%, same as that for 2020-21. This is less than the 42% share recommended by the 14th Finance Commission for the 2015-20 period," PRS. "The share of cesses and surcharges in the gross tax revenue of the Centre has nearly doubled to 19.9 percent in 2020-21 from 10.4 percent in 2011-12," and "Under the existing Finance Commission framework, the cesses and surcharges are not part of the tax devolution," BS. "As per the XV Finance Commission, states bear more than 62% of expenditure responsibilities but are given only 37% of revenue raising power, while the Union government owns 63% of revenue raising power to spend on 38% on its expenditure responsibilities," TNIE. "Agriculture is a State subject, i.e., it forms part of the State list of our Constitution which essentially means that States are supposed to address all the issues related to agriculture," Telangana Today. However, the central government banned export of wheat so that the domestic price of wheat has dropped from Rs 2,300 per 100 kg of wheat to Rs 2,015, ET. "India's hundreds of millions of small farmers eke out a borderline existence," and "The price fall represents the difference between a bumper payout and heartache, they say." Prof Subramanian used to be the Chief Economic Adviser of the central government. He is focusing on only one set of figures when fuel taxes have been high for 6 years. This affects the economy. And he is supposed to be an economist.    

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