Fuel Taxes

Subject – Economy

Context – Centre rakes in Rs 3.72 lakh crore, low basic excise duty limits states’ share

Concept –

As of now LPG, kerosene, naphtha, furnace oil, and light diesel oil are under GST.
Five other petroleum products viz. crude oil, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel lie outside the GST.
Currently, taxes on petroleum products are levied by both the Centre and the states.
While the Centre levies excise duty, states levy value-added tax (VAT).
As per recommendation of the 15th Finance Commission, the Centre shares 41 per cent of the tax receipts with states for award period 2021–26.
States’ share in central petroleum taxes remained low as the basic excise duty was not raised as much as other duties were hiked.
Petroleum taxes with states are shared only out of basic excise duty. The Centre also levies additional excise duty and cesses on petroleum products.

Cess and Surcharges –

A cess is imposed on the base tax liability of a corporation or an individual taxpayer, for a specific purpose. Surcharge is a tax on tax that the Union government can use for whichever purpose it deems fit.
The issue of cess and surcharge is currently not within the mandate of the Finance Commission, as these collections are not part of the divisible pool.
The government will have to amend Article 269 and Article 270 of the Constitution to make these a part of the divisible pool.