Prime Minister Narendra Modi's open rebuke of six states including Kerala for not reducing the sales tax on fuel even after the Centre reduced the excise duties seems to have made Kerala even more combative. Finance minister K N Balagopal made it clear yet again that the Kerala government has no intention of slashing the sales tax on petrol and diesel.
"When we have not increased sales tax for the last six years, what is there to decrease," he told reporters in Thiruvananthapuram on Wednesday.
During an online meeting with chief ministers to discuss the COVID-19 situation in the country on Wednesday, the Prime Minister named six states, all of them opposition ruled states, that had not decreased sales tax (Tamil Nadu, West Bengal, Telangana, Maharashtra, Kerala and Jharkhand) and asked them to immediately effect a cut in the rates.
The centre had cut excise duty on petrol by Rs 5 and diesel by Rs 10 on November 4, 2021. The Prime Minister had then said this was a cue for states to bring about a corresponding reduction in sales tax.
The minister said that the Prime Minister's statement was highly misleading. "After the LDF came to power we have decreased the sales tax on fuel once, but never have we caused an increase," Balagopal said. In 2018, the LDF government had reduced the tax rate and brought it down to 30.80% (petrol) and 22.7% (diesel) from the UDF rates of 31.80% and 24.75%. Along with this, Kerala also collects a one percent fuel cess and an additional sales tax of Rs one per litre for both petrol and diesel. The 2018 sales tax cut had inflicted a loss of nearly Rs 1500 crore, according to official estimates.
On the other hand, Balagopal said the Centre had been relentlessly increasing the various impositions on fuel. He said the excise duties charged in April 2017 was just Rs 9 a litre. Now, he said it was Rs 31 a litre.
Worse, the minister said the Centre was accumulating most of the receipts for itself. He said 41% of the excise duty was supposed to be shared with states.
To narrow down the shareable pool, he said the centre reduced the excise duty on a litre of petrol to 1.40% and on diesel to Rs 1.80 per litre. Instead, the centre increased special duties and cesses that need not be shared with states. While the excise duty on petrol is Rs 1.40 a litre, the special additional excise duty is Rs 11 per litre and the road and infrastructure cess is Rs 13 a litre.
Balagopal even termed the cesses and additional duties "unconstitutional". "The Constitution (Article 271) clearly states that these could be imposed only in special circumstances like war, emergency or natural disasters. And these should not be in existence for more than six months or a year," the minister said.
The minister made it clear that Kerala could not afford to reduce the sales tax on petrol. "GST has already deprived us of taxing powers. Petrol and alcohol are the only remaining items we still have control over," Balagopal said. "But the Centre, through cesses and surcharges, are trying to steal even the little that the states have," he said.
He likened the states to a farmer who once possessed 10 acres of coconut grove. "The man lost eight acres by way of central encroachment in the form of GST. Now, by imposing cesses and surcharges, they are trying to steal the coconuts from the residual two acres the man is left with," the minister said.
When he was told that states like Karnataka and Gujarat had reduced sales tax in the wake of the Centre's excise duty cut in November, this is what Balagopal said: “These states might have enough resources at their command.”
