Pinarayi terms Modi's VAT rebuke unbecoming of an administrator, violation of federal principles

Chief Minister Pinarayi Vijayan, too, has come out against Prime Minister Narendra Modi for publicly asking six states including Kerala to slash sales tax on fuel. Instead, the chief minister wanted the Centre to put an end to the “incremental increase in fuel prices”.

Pinarayi laid down the very same arguments put forward by his Finance Minister KN Balagopal on April 27.

"Let me make it clear that in the last six years Kerala has not even once increased sales tax on petroleum products. On the other hand, since 2014 the Central government has increased duties on petroleum products 14 times and reduced it four times," the chief minister said.

He also underlined that the Centre's increase was not on the basic excise duty that had to be shared with the states. The finance minister had also made this point when he said that the excise duty on a litre of petrol was just Rs 1.40 per litre for petrol and Rs 1.80 per litre for diesel.

The components of the excise duty that remained high were special duties and cesses that need not be shared with the states. For instance, the special additional excise duty is Rs 11 per litre and the road and infrastructure cess is Rs 13 a litre for petrol; in the case of diesel, it is Rs 8 for both.

The chief minister said that the total excise duty on petrol which was Rs 9.48 in 2017 had soared to Rs 32.98 a litre. After the excise duty cut last November, it is Rs 27.9 per litre. Diesel's duty ballooned from Rs 3.56 to Rs 31.83 a litre. After the November cut, it is Rs 21.8 per litre.

Pinarayi said that a substantial chunk of the increase was made up of cesses and surcharges.

"These have now risen to 15 per cent of the Centre's total tax receipts. As per law, these needn't be shared with the states," Pinarayi said.

"The Centre is increasing taxes in such a way that these fall outside the tax-sharing formula evolved by the Finance Commission," he added.

He said the Centre was subjecting states, which were still to get over the COVID crisis, to additional distress by delaying the payment of GST compensation.

"This attempt to blame the inflation on states goes against the basic principles of cooperative federalism," Pinarayi said.

He said it was unfortunate that such a remark came from a ruler who was fully aware of the fiscal constraints faced by a state that spends considerably on social welfare.

Pinarayi said the Centre should put an end to the incremental increase in fuel prices. "The misery suffered by the public cannot be lessened by unnecessarily blaming the states," he said.