Tamil Nadu Finance Minister Palanivel Thiaga Rajan has said that the central government has never consulted the states when raising taxes and his state has already suffered a loss of over Rs 1,000 crore due to tax cuts announced by the central government in November 2021.
Despite the announcement of tax cuts on Saturday, the rate was still higher than in 2014, he noted.
“It is pertinent to mention that the union never consulted with the states when they raised taxes on petrol and diesel more than once. Higher than the 2014 rate.”
“Therefore, it is not fair or reasonable for states to expect their taxes to be reduced,” he said in a statement in response to Union Finance Minister Nirmala Sitharaman’s announcement to reduce excise duty on petrol by a record Rs 8 per liter. Diesel: Rs.
Thiagarajan further said that it was “heartening” to note that the Center had “finally heeded the repeated requests of the Tamil Nadu government to reduce taxes on petrol and diesel, which were drastically increased by the central government from 2014 to 2021”.
He recalled that the DMK government led by MK Stalin had implemented VAT reduction in August 2021, which resulted in reduction in petrol price by Rs 3 per liter.
This resulted in an annual revenue loss of Rs 1,160 crore for the state government but it was done for the benefit of the people despite the financial pressure inherited from the previous AIADMK government.
“The central government’s tariff on petrol has increased significantly in the last seven years. Although the central government’s revenue has increased manifold, it has not increased in line with the revenue of the states. The reason is that the central government has increased petrol. Can be shared with the states, ”he said.
On August 1, 2014, the central tax was Rs 9.48 per liter on petrol and Rs 3.57 per liter on diesel.
Before the central government reduced taxes on petrol and diesel in November 2021, taxes including cess and surcharge on petrol were Rs 32.90 per liter and Rs 31.80 per liter on diesel.
“It was reduced to Rs 27.90 per liter for petrol and Rs 21.80 per liter for diesel. Now, it has been further reduced to Rs 19.90 per liter for petrol and Rs 15.80 per liter for diesel,” he said.
Although the Center has reduced taxes, it is still ‘higher’ than in 2014 at Rs 10.42 per liter for petrol and Rs 12.23 per liter for diesel.
“Therefore, the central government has a strong case for further reduction of its taxes,” the minister argued.
Thiyagarajan said the Centre’s tax cuts in November 2021 had resulted in an annual revenue loss of Rs 1,050 crore for Tamil Nadu, the latest being a further Rs 800 crore a year.
This will put a huge strain on the finances of the states.
“Although this government has inherited an uncertain financial position from the previous arrangement and has spent extra for Covid-19 relief activities, it has reduced the tax on petrol within months of assuming responsibility for the welfare of the people. Tamil Nadu, despite its limited taxation power, Has taken proactive steps to reduce the tax burden, “he said.