Taxes on petrol and diesel add up to two-thirds of retail prices, at an all-time high now and a threat to economic recovery. Note that taxes on petrol and diesel alone have surged nearly six-fold in the past seven years, to over ₹3 lakh crore annually.
It is high time the Centre and the state governments pared taxes on petrol and diesel. Retail oil prices have surged well beyond ₹100 per litre due to flaring global crude prices and an unreformed, cascading and regressive tax-on-tax regime for oil products that combine to threaten cost-push inflation. The authorities surely must apply the fiscal brakes quickly and bring down retail taxes and duties on the main oil products for revenue balance.
Taxes on petrol and diesel add up to two-thirds of retail prices, at an all-time high now and a threat to economic recovery. Note that taxes on petrol and diesel alone have surged nearly six-fold in the past seven years, to over ₹3 lakh crore annually. True, it has hugely benefited the fisc, in this time of Covid-constrained governmental revenues. But now as recovery sets in, regressive oil taxes make no sense. Note also that the Centre last year jacked up the excise duty on petrol and diesel to make up for the fall in global crude prices, and the high specific duties remain very much in place never mind soaring prices of crude. These should drop. In tandem, state retail taxes on the oil products also need to be brought down. The latter are ad valorem, linked to base prices, and rise disproportionately in the backdrop of higher quotes on crude. The way ahead surely is to also have specific state taxes on the oil products.
Automotive fuels and electricity do need to be included in the modern integrated goods and services tax (GST) regime, with tax set-offs available along the value chain for tax efficiency, so as to put paid to the extant perverse tax-on-tax regime for the main oil products. The indirect tax regime nationally, heavily focused on oil, needs a far wider base.
Jul 08, 2021Fuel Prices In Metro CitiesDieselPetrol
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