The federal government can reduce excise taxes on gasoline and diesel by £ 8.5 per liter with out affecting revenues

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Excise duty was raised by  ₹13 and  ₹16 per litre on petrol and diesel between March 2020 and May 2020, and now stands at  ₹31.8 on diesel and  ₹32.9 per litre on petrol (Photo: Ramesh Pathania/Mint)

NEW DELHI : The government has room to cut excise duties on gasoline and diesel by up to up to £8.5 per liter without detracting from the target for revenue from tax on the two fuels, analysts said.

Gasoline and diesel prices are hovering at an all-time high after a relentless surge in rates over the past nine months. Opposition parties, as well as sections of society, have called on the government to cut excise taxes to ease consumer pain.

“We estimate the excise tax on fuels in fiscal year 22 (April 2021 to March 2022) if it is not lowered £4.35 lakh crore versus budget estimate of £3.2 lakh crore.

“Well, even if the excise tax is lowered £8.5 per liter on or before April 1, 2021 may hit the fiscal 22E budget estimate, “ICICI Securities said in a note.

She was optimistic about a cut in excise taxes amid recovery in demand, impending privatization and inflation concerns, but expected a more modest than £8.5 per liter.

The excise tax was levied by £13 and £16 per liter on petrol and diesel between March 2020 and May 2020 and is now available £31.8 on diesel and £32.9 per liter where oil.

The excise tax hike served to offset gains from the drop in international crude oil prices to a two-decade low.

However, with the recovery in oil prices, taxes have not yet returned to their original level.

“If the cut is more modest, which is what we expect, the fiscal year 22 excise tax will be higher than the budget estimate,” said ICICI Securities.

Central and state taxes make up 60% of the retail sales price of gasoline and over 54% of diesel.

Gasoline costs £91.17 per liter in Delhi and diesel comes in for £81.47.

Regular gasoline prices had exceeded that last month £100 marks in some places in Rajasthan and Madhya Pradesh, which levy the highest value added tax (VAT) on the country’s fuel.

Between November 2014 and January 2016, the government increased excise taxes on gasoline and diesel nine times in order to erase the gains from the global drop in oil prices.

Overall, the petrol tariff was raised by £11.77 per liter and that on diesel up 13.47 per liter in the 15 months that helped the government’s excise tax more than double £2,42,000 crore in 2016-17, from £99,000 crore in 2014-15.

The government had lowered the excise tax by £2 in October 2017 and from £1.50 a year later. But it increased the excise tax by £2 per liter in July 2019. In March 2020, the excise tax was increased again until £3 per liter each. In May of this year, the government increased the consumption tax on gasoline £10 per liter and that on diesel from £13 a liter.

This story was published by a wire agency feed with no changes to the text. Only the heading was changed.

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