The government may need to make up the revenue loss entirely through market borrowing

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After the Center slashed excise duties on petrol and diesel by cutting retail fuel prices, the government could borrow the entire Rs 1 lakh crore it will forgo as revenue due to the reduction in levies, according to a report. The government has reduced excise duty on petrol by Rs 8 per liter and on diesel by Rs 6 per litre. This will result in a reduction of 9.5 rupees per liter in the price of petrol and 7 rupees per liter of diesel.

The increase in GST and personal income tax will be offset by additional spending on food subsidies and fertilizers and therefore the loss to the treasury from recent excise duty cuts will have to be borne. by additional borrowing from the market, according to the ET report.

While announcing the decision to reduce fuel excise duty, Finance Minister Nirmala Sitharaman said in a tweet on Saturday: “We are reducing central excise duty on petrol by Rs 8 per liter and on diesel from Rs 6 per litre. This will reduce the price of petrol by Rs 9.5 per liter and diesel by Rs 7 per litre. This will impact the revenue of about Rs 1 lakh crore per year for the government.

The price of petrol in Delhi stood at Rs 96.72 per liter on Tuesday from Rs 105.41 per liter earlier, while diesel will cost Rs 89.62 per liter from Rs 96.67 earlier. Every state in the country witnessed the fall in prices after the Center cut duties. Beyond this, Maharashtra, Rajasthan and Kerala have also reduced value added taxes, thereby further lowering fuel prices.

The central government had also reduced excise duty in November 2021, which impacted the revenue of Rs 1,20,000 crore per annum for the Centre. “The duty reduction carried out yesterday has an implication of Rs 1,00,000 crore per annum for the Centre… The total revenue implication for the Centre, on these two duty reductions is therefore Rs 2,20,000 crore per annum “said the Minister of Finance in a tweet. .

Sitharaman also said on Sunday that excise duties on gasoline and diesel that have been deducted by the Center are not shareable with states. In another tweet, Sitharaman said, “Basic Excise Duty (BED), Special Supplementary Excise Duty (SAED), Road and Infrastructure Tax (RIC) and India Development Tax Agriculture and Infrastructure (AIDC) together constitute an excise duty on gasoline and diesel. The basic ED is shareable with states. SAED, RIC & AIDC are not shareable.

She added that the reduction in excise duty of Rs 8 per liter on petrol and Rs 6 per liter on diesel (effective from today) has been fully achieved in Road & Infrastructure Cess ( RIC). “Even on Nov 21, the reduction of Rs5 per liter of petrol and Rs10 per liter of diesel was fully realized in RIC,” the finance minister said in another tweet.

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