Entire annual burden of fuel tax cuts to be borne by Centre: FM

NEW DELHI: A day after announcing a hefty fuel tax cut, Union finance minister Nirmala Sitharaman on Sunday said the two rounds of duty reductions—the last one being in November—will cost the exchequer Rs 2.2 lakh crore annually and the states’ share from the tax pool will not be affected as the Centre had opted to cut cess on petrol and diesel, which are outside the divisible pool.

The non-BJP-governed states, however, held out against matching the Centre’s move by cutting VAT. Most of them argued that since VAT is usually charged as a proportion of the price (ad valorem) after adding central levies and other costs, the sharp reduction in excise duty has automatically brought down the tax in most states. Only Bihar, where BJP is a partner in the government, has held out hope of a reduction in VAT, with chief minister Nitish Kumar saying he will discuss the issue with coalition members.

In Karnataka, CM Basavaraj Bommai said the government will consider a further reduction, while Odisha is expected to decide in the next few days.