Burden of fuel tax cuts fully borne by Centre: Nirmala Sitharaman

Duty reduction in petro products carried out from Road & Infra Cess, and there’s zero impact on state revenues, says Union Finance Minister

Nirmala
Union Finance Minister Nirmala Sitharaman

In a series of tweets, Union Finance Minister Nirmala Sitharaman on Sunday said the entire duty reduction in petrol and diesel, announced on Saturday, is being implemented out of the Road & Infrastructure Cess (RIC) component of the taxes levied on petroleum products. Hence, the entire burden of the tax cuts will be borne by the Centre, with little impact on state revenues, she said.

Sitharaman was seeking to allay concerns that the duty cuts will bring down the devolution of taxes to states. 

Also read: Petrol, diesel cheaper: How states have reacted to Centre’s cut on excise duty

“The Basic Excise Duty (BED), Special Additional Excise duty (SAED), Road & Infrastructure Cess (RIC) and Agriculture & Infrastructure Development Cess (AIDC) together constitute Excise Duty on petrol and diesel,” the FM tweeted. “Basic ED is sharable with states. SAED, RIC & AIDC are non-sharable.”

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The excise duty reduction of ₹8/l on petrol and ₹6/l on diesel (effective Sunday) has entirely been made in the RIC, she explained. Even in November 2021, the reduction of ₹5/l in petrol and ₹10/l in diesel was entirely made in RIC, she recalled.

“Basic ED, which is sharable with states, has not been touched,” she said in response to concerns that increasingly lesser tax is being devolved to states. “Therefore, the entire burden of these two duty cuts (made in Nov 2021 and yesterday) is borne by the Centre,” she added.

Sitharaman further said the duty reduction made yesterday has an implication of ₹1,00,000 crore a year for the Centre. The one made last November has an implication of ₹1,20,000 crore a year for the Centre, she observed, concluding that  the total revenue implication comes to ₹2,20,000 crore a year.

Expenditure on development

RBI data show that the total developmental expenditure incurred by the Centre during 2014-22 was ₹90.9 lakh-crore, she tweeted. “In contrast, only ₹49.2 lakh-crore was spent on developmental expenditure during 2004-14.”

“The expenditure incurred by our Govt under  @PMOIndia @narendramodi  includes ₹24.85 lakh crore spent so far on food, fuel and fertiliser subsidies and ₹26.3 lakh crore on capital creation,” said the Finance Minister. “Over the 10 years of UPA, only ₹13.9 lakh-crore was spent on subsidies.”

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