Excise duty cut: Congress’s Chidambaram asks if ‘states can afford to give up VAT revenue’

Senior Congress leader P Chidambaram hit out at the Centre after it announced that it was reducing the excise duty on petrol and diesel prices, and wondered if states could afford to give up revenue from VAT on petrol and diesel unless the “Centre devolves more funds or gives them more grants.”

Chidambaram compared the situation of the states to being between “the devil and the deep sea”.

After retail inflation surged to an eight-year high this month, the Centre on Saturday announced a series of measures — including a reduction in excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre.

“The notification on reduction of duty on Petrol and Diesel is now available. FM used the words ‘Excise Duty’, but the reduction is in Additional Excise Duty which is not shared with the states. Hence, contrary to what I said yesterday, the entire burden of the reduction falls on the Centre. To that extent, I stand corrected,” the former Union finance minister said.

Chidambaram said the states were getting very little by way of share of duties on petrol and diesel and noted that their revenue was from VAT on petrol and diesel.

“I wonder if they can afford to give up that revenue unless the Centre devolved more funds or gave them more grants,” Chidambaram said.

Union Finance Minister Nirmala Sitharaman on Saturday said the fresh cut in excise duty on fuel has a revenue implication of Rs 1 lakh crore a year and urged state governments to follow suit.

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