Opposition leaders on Wednesday reacted sharply to Prime Minister Narendra Modi’s comments that States ruled by them had not reduced value added tax (VAT) on petrol and diesel despite the Centre slashing excise duty and they should do so at the earliest in order to benefit the consumers.
West Bengal Chief Minister Mamata Banerjee and her Maharashtra counterpart, Uddhav Thackeray, pointed out how much the Centre owed their respective States. They also took the opportunity to talk about the Centre’s discrimination against States ruled by BJP rivals while meting out preferential treatment to BJP-ruled ones.
‘Not on agenda’
Ms. Banerjee questioned why the Prime Minister chose to raise the issue at a meeting of Chief Ministers (CMs) that was convened to discuss the rising cases of COVID-19.
Kerala Finance Minister K.N. Balagopal said that Mr. Modi’s stand on the matter was misleading and said that instead of asking resource-starved States to slash their limited income source, the Centre should put a stop to collecting the cess and surcharge on petrol and diesel.
The Congress too said that Mr Modi’s remarks did not befit the Prime Minister’s office and were “irresponsible”.
During a virtual interaction with Chief Ministers, the Prime Minister pointed out that the Centre had urged the States to reduce taxes but several of them had not done so. Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand and Tamil Nadu for some reason or the other have not passed on the benefit to consumers, he added.
“We wanted prices of petroleum products to be reduced but the Prime Minister is asking the States to reduce the taxes. From where will we do that?” Ms Banerjee asked.
The West Bengal Chief Minister claimed that the Centre owed ₹97,000 crore to the State and even if half of the amount was disbursed to the State, then it could reduce the VAT on petroleum. The Chief Minister pointed out that her government was giving a ₹1 reduction on VAT on petroleum products, which has cost ₹1,500 crore to the State exchequer. Ms. Banerjee claimed that since coming to power, the Narendra Modi government has raised ₹17,31,242 crore through excise collection on petroleum products. Of the money collected through central taxes, only 25% was given to the States., she added.
Outstanding dues
Echoing her, the Maharashtra Chief Minister also complained about the Centre not paying his State its due.
“The Union government owes ₹26,500 crore to the Maharashtra government. Maharashtra’s contribution in direct tax collection at the national level is 38.3% and its share in the GST (collection) is 15% , but the Centre gives us stepmotherly treatment,” Mr. Thackeray said.
Adding that Mr. Modi’s hint that costly fuel was a result of State taxes was far from reality, Mr. Thackeray said, “Today in Mumbai, behind every litre of diesel, the Central VAT is ₹24.38 while the State VAT is ₹22.37. In petrol, ₹31.58 is the Centre’s tax while the State tax is ₹32.55.”
Kerala’s response
Mr. Balagopal, Kerala’s Finance Minister, said, “Kerala has not hiked the sales tax on petrol and diesel in the last six years. It is one of the few States which has not done so. So what is it that we should reduce?”
Stating that the Prime Minister’s remarks did not befit his position, Congress spokesperson Pawan Khera said, “The Prime Minister expects the States to reduce VAT on petrol and diesel without first giving an account of the Central Excise, through which the Central government has earned ₹27 lakh crore in the last eight years.”
