Most of the states in the country still have an opportunity to reduce the value-added tax (VAT). If these states do this, then they can reduce the price of diesel by Rs 2 and petrol by Rs 3. However, Maharashtra has a chance to reduce both by Rs 5 per liter.
Sometime back when the excise duty was increased, the states used to earn Rs 49,229 crore as VAT on the sale of oil. When it was reduced in the same month, it affected their earnings by Rs 15,021 crore. Even after this, these states are earning Rs 34,208 crore.
Claim in SBI report
The country's largest bank SBI Chief Economist Soumya Kanti Ghosh released a report on Monday. It said that when the central government increases the excise duty, the revenue of the states increases, and when it decreases it decreases. According to the report, Maharashtra is earning the highest VAT. After that, there are Gujarat and Telangana. The average VAT on petrol in Maharashtra, Telangana, and Andhra Pradesh is 29.6 percent.
Excise duty reduced to reduce inflation
The central government had reduced the excise duty by Rs 8 on petrol and Rs 6 on diesel to check high inflation. Thereafter, some states reduced VAT marginally. It has been said in the report that if these states reduce the prices, then it will not cause any loss to them.
Also, when the central government reduces the duty, the revenue of the states automatically decreases. According to the report, the financial condition of the states has improved after the Corona epidemic, as their borrowings have been very low for the rest of the years except FY 2020. This allows them to absorb the tax.
Problems will be overcome by bringing them under the ambit of GST
According to the report, it should be brought under GST to reduce the complexity of the tax structure of oil and stabilize the revenue from the volatility of its prices. If petrol and diesel are brought under the purview of GST, then the central government will have to give up an input tax credit of Rs 20 thousand crores.
Only Assam is suffering
According to the report, only Assam is facing losses at this time. Earlier this state used to earn 188 crore profit. After the reduction of duty, it has an effect of Rs 311 crore, that is, it is incurring a loss of Rs 125 crore. Maharashtra is earning a maximum of Rs 5,510 crore from VAT while Gujarat is earning Rs 4,808 crore. Telangana is making a profit of Rs 3,212 crore, Tamil Nadu 2,554 crore, Andhra Pradesh 2,546 crore, and Karnataka Rs 2,238 crore.
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