Tamil Nadu’s finance minister PTR Palanivel Thiagarajan on Sunday said that it was not possible to cut down the Value Added Tax (VAT) on petrol and diesel with immediate effect.. This, he explained, was due to the current fiscal situation of Tamil Nadu. He promised that the prices would be brought down once Tamil Nadu’s financial situation improved in the future.
The minister argued with journalists who brought up the question on petrol prices, with respect to DMK’s poll promise. He specified that the DMK has not made any poll promise to effect an immediate cut in fuel prices. When a reporter posed a fuel price related question vis-a-vis DMK's poll promise, he asked if his party had given a specific date to effect the cut.
Hitting out at the centre for a three-fold plus rise in taxation of fuel over the years, he said the union government however did not share such additional revenue with states as it covered these under the heads of cess and surcharge. He added that the union government, in its budget, increased the cess on fuels and deprived the state of revenue. The union government increased taxes collected for petrol and diesel by 63 percent from 2.40 lakh crore to 3.90 lakh crore, and also that Tamil Nadu’s fiscal situation was worse than what the new elected government had feared, he said.
That is the reason why the state government could not immediately reduce tax, he pointed out. He also added that his team was working on releasing a white paper on Tamil Nadu’s finances and that it would be released in about two weeks after the Governor’s Address to the State Assembly, which took place on Monday.
In his meeting with trade associations in Tamil Nadu, the finance minister added that the state was forced to rely on indirect taxes such as VAT to generate revenue, as all progressive taxing systems were vested with the Union government.
However, he added that the TN government will not go back on its poll promise and that once the injustice was corrected, the prices on petrol and diesel would be reduced.
Replying to a tweet by Sumanth Raman, who pointed out that the DMK government had promised to slash petrol and diesel prices by Rs 5 and Rs 4 respectively, the finance minister tweeted, “Things we didn’t know then: Union budget would switch ₹50,000 crores from excise to cess (not shared with states). The full extent of fiscal decay.”
Things we didn’t know then:
— Dr P Thiaga Rajan (PTR) (@ptrmadurai) June 20, 2021
1) Union Budget would switch ~50,000 Cr from Excise to Cess (not shared w/ States)
2) Scale of COVID 2nd wave & spending required (1000s of Crores)
3) Full extent of Fiscal decay
We did NOT promise immediate cut
We WILL cut during our term https://t.co/LtYLC302Ko