The tax wars.

The Prime Minister took the opposition chief ministers by surprise at a Covid-review meeting, yesterday, when he chided them for not reducing taxes to contain fuel prices triggering a volley of angry retorts from Kerala, Maharashtra, West Bengal and Telangana.

The Tax Component

* Central and state taxes form a major chunk of the fuel prices in our country.

* While Excise Duty is constant all over India, state taxes (Sales Tax and VAT) vary depending upon the rates levied by the state governments.  

* In November last year, the centre had slashed Excise Duty on both petrol and diesel to bring some relief to the end-use customers. It was reduced by Rs.5/- per litre on petrol and Rs.10/- per litre on diesel.

* However. opposition-ruled states like Andhra Pradesh, Kerala, Maharashtra, Tamilnadu, Telengana, Jharkhand and West Bengal decided to continue with the existing VAT rates.

The GST Payout

The states always used to crib that the central government owed them huge amounts in the form of the GST payout.

Joining issue with CMs complaining of pending GST compensation, he said that in all Rs. 2.78 lakh crores compensation was released to the states for 2020-'21 and that nothing was pending for FY 21. As for 2021-'22, Rs.7.35 lakh crores has been released under that head. Compensation of Rs.78,704 crores alone is pending for FY 22.

The Pricing Mechanism

The existing scheme was implemented on 16 Jul 2017 by which the prices are reviewed every morning at 6 AM (Earlier it used to change every fortnight).The dynamic pricing system - as it is called - was introduced :-

 (a) to ensure that the benefit of the smallest change in international oil prices could be put into effect by the dealers and

 (b) to prevent huge leaps at the end of the fortnight.

My take.

Let's watch as to how this tussle is resolved so that the common man is relieved of the burden of huge fuel costs.

Tailpiece.

Got up around 6, the chores and was ready by a quarter to 10.

Called up Suseelakutty to offer our condolences on the loss of her mother (83). My trip to Alappuzha tomorrow has been postponed, instead will have to go to Kochi on 06 May to discuss district-wise organisational issues.

Helped Lekha in watering the plants.