Kerala reiterates it won't cut fuel tax, cites financial situation

Finance Minister KN Balagopal said the state government launched relief packages for COVID-19 and recent disasters, which may be affected if the taxes on fuel price are cut.
Kerala Finance Minister KN Balagopal, in a light green shirt, wearing white mask, facing mike.
Kerala Finance Minister KN Balagopal, in a light green shirt, wearing white mask, facing mike.
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The Kerala government has reaffirmed its stand that it could not forego the taxes on fuel due to the grim financial situation in the state, and said that there was a natural proportionate decrease in the state tax with the Union government's tax cut due to the peculiarity of the tax structure in the state. “When many other states had increased fuel tax and introduced cess during the COVID-19 period, Kerala had not done so considering the plight of struggling citizens,” state Finance Minister KN Balagopal told a press conference in Thiruvananthapuram on Friday, November 5.

He also alleged that the Union government's present decision to slash excise duty on petrol and diesel was due to the setbacks suffered by the BJP in the recent bypolls in various states. Justifying the state's decision not to cut the additional tax on fuel, the Finance Minister said Kerala has not increased the state tax on petrol and diesel for the last six years, and that it had even reduced it once.

The minister further said that the state government has also launched several financial relief packages to those hit by COVID-19 and the recent disasters, as well as increased the dearness allowance by 6%, all of which may be affected if the taxes on fuel price is cut.

Explaining that the tax structures for petrol and diesel imposed by the Union government and the state were different, the minister said that when the Union government reduces its tax or the basic price of fuel, it would naturally reflect in the state tax, as a proportionate decrease would happen there also. "When the Union government reduces its tax by Rs 10 and Rs 5 for diesel and petrol respectively, it has actually been reduced by Rs 12.30 and Rs 6.56 in Kerala," he said.

"Though there was no special announcement, the tax on fuel has actually been reduced in Kerala. The value-based tax structure in the state was formulated on that line," the minister added.

Criticising the Congress-led United Democratic Front opposition which demanded the tax cut, Balagopal said the previous Oommen Chandy government had increased the tax 13 times.

But, after the Pinarayi Vijayan government came to power in the state in 2016, the state has not increased the fuel tax so far, he added.The Union government had increased the tax by over Rs 31 in the last seven years and has reduced only Rs 10 and Rs 5 from this now, he pointed out.

“The BJP-led Union government has now taken a misleading stance in the name of fuel price,” he claimed, adding that states were not receiving a share of the revenue collected via the additional tax which was being levied irrespective of the international price fluctuations of petroleum.

The minister's explanation came in the wake of the opposition Congress and BJP flaying the state government for not reducing the tax on fuel on the lines of the Centre.

The Kerala Assembly on November 2 had witnessed a war of words between the CPI(M)-led ruling front and the Congress-headed opposition over frequent fuel price hikes in the country. The latter walked out of the House, terming it as "state-sponsored tax terrorism."

Though the LDF government maintained that it was the Union and not the state government which was responsible for the fuel price hike, the UDF members wanted it to forego the additional tax revenue generated on its sales for the sake of struggling commoners.

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