'You hiked fuel tax, you reduce them', Tamil Nadu tells Centre

State FM Palanivel Thiaga Rajan said that the Union Government should remove the levy of cesses and surcharges and revert to rates that prevailed in 2014

In a strong response to Prime Minister Narendra Modi’s statement that Opposition-ruled states not reducing fuel taxes in synchronisation with the Centre has burdened people there, Tamil Nadu Chief Minister M K Stalin on Thursday said the remarks are akin to “trying to cover a pumpkin in a handful of rice.”

Stalin and Finance Minister P T R Palanivel Thiaga Rajan tore into the Union Government by accusing it of “devouring” Rs 26 lakh crore rupees from fuel prices in the last 8 years. Rajan said the Centre still levies an additional tax of Rs 18.42 per litre for petrol, which “is an increase of roughly 200 per cent” and Rs 18.23 per litre for diesel, an ”increase of over 500 per cent” compared to the taxes in effect when BJP took office in 2014.

Inside and outside the House, Stalin said while the BJP increased the tax on fuel after the elections (five state polls), the DMK reduced the price after it came to power, pointing to its August 2021 decision to cut the VAT on petrol by Rs 3.

Read | People know the facts: TN CM on PM's fuel tax statement

“Having made hay out of the decline of crude oil prices and devoured Rs 26 lakh crore from fuel prices in the last 8 years, to blame the Opposition-ruled states for the steep hike in fuel prices is akin to trying to cover a pumpkin in a handful of rice,” Stalin said.

The politically aware people of Tamil Nadu, Stalin said, “are not oblivious to these simple facts and it is only a matter of time before the rest of India sees through the bogus claims of BJP government.” Briefing reporters, Rajan said the DMK always had the history of reducing the tax on fuel and had never increased – thrice by M Karunanidhi (2006-2011) and once after the party assumed office in May 2021 – to accommodate rising prices.

Explained: How much tax do you pay on Rs 100 of petrol?

“We haven’t increased (the taxes). On the contrary, we have cut taxes on our own much before the decision of the Union Government. It is neither fair nor feasible for states to effect a cut in their share of taxes. The Centre has been increasing cesses and surcharges for the past eight years,” Rajan told the media.

“Whenever taxes were raised, it has always been under the AIADMK. But it is lower than the tax increase done by the Union,” he said. Rajan also “reminded” the BJP that the taxes on fuel in states ruled by it like Uttar Pradesh and Madhya Pradesh are on par or slightly lower than Tamil Nadu despite the cut in November.

It is for the Centre to reduce the taxes, Rajan said, adding that the Union Government should remove the levy of cesses and surcharges and revert to rates that prevailed in 2014.

Rajan said the Prime Minister saying that states not cutting taxes in synchronisation with the Union Government’s decision is against the spirit of cooperative federalism was unfathomable for him.

“What is fiscal federalism? Is it supposed to be that we will have to be the extended arm of the Union Government without independent thinking and independent decision making? Constitution says state and Union governments are equal arms of the government. Not one top on the other and not one dictated to by the other. Is it in the nature of cooperative federalism that cesses and surcharges have been tripled by them?” he asked.

Is it in the right spirit of “cooperative federalism” to take away the state’s rights on direct taxation through GST, Rajan asked. On whether the state government will cut taxes, he replied: “If it comes to it, and if we have to do it, then the Chief Minister will do the right thing.”

Though the revenue to the Union Government has increased manifold, there has not been a matching increase in the revenues to states, Rajan said. “This is because the Union Government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the States,” he contended.

Quoting an example, Rajan in a statement said that in 2020-21, the revenue to the Union Government's revenue from levies on petrol and diesel was Rs 3,89,622 crore which was 63 per cent higher than the revenue of Rs 2,39,452 crore in 2019-20. On the other hand, the Government of Tamil Nadu in 2020-21 received only Rs 837.75 crore as a share of the tax devolution from the Union Excise Duties on petrol and diesel as against the Rs 1,163.13 crore received in 2019-20.

Watch latest videos by DH here: