The Tamil Nadu government on Thursday hit back at the Centre and reiterated its earlier demand to reduce the cess and surcharges levied on fuel prices and merge them with basic tax rates so that states receive their rightful share from the Union taxes. Minister for Finance and Human Resources Management Palanivel Thiaga Rajan said the taxes on fuel prices levied by the Centre continue to be "exorbitant" and it was neither 'fair' nor 'feasible' for the State to further reduce it.
The remarks by the Minister were in response to the comments made by Prime Minister
Narendra Modi on Wednesday that the Centre reduced excise duty to lower the burden of fuel prices on November 2021, while some states reduced it, some did not provide that benefit to the people. Modi in his meeting with Chief Ministers had said Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand and Tamil Nadu did not heed to its request and the public continued to be burdened.
Rajan, in a statement on Thursday, referred to the Tamil Nadu government's cut on the Value Added Tax in August 2021 resulted a relief of Rs 3 per litre soon after his party assumed office in May 2021. Continuing his attack on the Centre that the levies on petrol increased substantially in the past seven years, Rajan said, though the revenue to the Union government increased 'manifold' there was no matching increase in the revenues to the states. "This is because the Union Government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the states."
The Minister said, in August 2014, the basic price of petrol was Rs 48.55 per litre while diesel was Rs 47.27 per litre. The Central government taxes were Rs 9.48 per litre on petrol and Rs 3.57 per litre on diesel. The state government taxes were at Rs 15.67 per litre on petrol and Rs 10.25 per litre on diesel, he said.
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Following the reduction of taxes by the Centre in November 2021 at Rs 5 per litre on petrol and Rs 10 per litre on diesel, the Union government still levies an additional tax of Rs 18.42 per litre for petrol and Rs 18.23 per litre on diesel, he pointed out. The Tamil Nadu government levies taxes of Rs 22.54 per litre on petrol and Rs 18.45 per litre on diesel and after the introduction of the Goods and Services Tax (GST), the states have 'lost substantial powers' to levy their own taxes and raise revenue, he said.
The COVID-19 pandemic further burdened the state with finances being 'severely affected' and also incurring large-scale additional expenditure towards providing COVID-19 relief, he said. Noting that the GST compensation regime comes to an end by June 30 and several states including Tamil Nadu have requested the compensation to be extended, he said there was no clarity from the Centre on whether the compensation would be extended or not.
DMK has been an ardent proponent of "co-operative federalism" and has been practising it from the days of (former Chief Minister) Anna, Kalaignar (the late DMK patriarch M Karunanidhi) and continue to do so under present Chief Minister M K Stalin, he said. "We have repeatedly urged the Union government to reduce the cess and surcharges being levied and merge them with the basic tax rates so that states get their rightful share from the proceeds of the Union taxes," he said.
"Given that the Union government's taxes continue to be exorbitant, it is neither fair nor feasible for the state government to further reduce taxes. We reiterate that the sole, simple and fair approach for the Centre is to remove the levy of cess and surcharges and revert to the rates that prevailed in 2014," he said.
