Taking aim at the opposition-ruled states at a high-level meeting with Chief Ministers, PM Modi today requested them to reduce the Value Added Tax (VAT) on fuel "in the spirit of cooperative federalism". Listing fuel prices in cities across the country, PM Modi pointed out that states which had lowered VAT have lower fuel prices. Stressing the spirit of cooperative federalism enshrined in the Constitution, he said the country strongly fought a long battle against Covid through that spirit and must also do the same for economic issues given the impact of global issues like the ongoing "war-like situation".
"Let me give you a small example. The Centre reduced the excise duty on petrol and diesel last November to reduce the burden on the citizens. We also requested the states to reduce their taxes and transfer the benefit to the people. Some states reduced taxes but some states did not give any benefit from this to the people. Due to this, the prices of petrol and diesel in these states continue to remain high. In a way, this is not only an injustice to the people of these states but it also has an impact on neighbouring states," PM Modi said.
"I am not criticising anyone, just discussing," the PM said while listing out the states that did not reduce VAT on fuel during the steep hikes. "For some reason, states like Maharashtra, West Bengal, Telangana, Andhra Pradesh, Tamil Nadu, Kerala, and Jharkhand did not agree to slash VAT on fuel. The burden of high prices continued to stay on the citizen," he said.
The PM said it's natural that those states that reduce their taxes will suffer losses in revenue but several states took that "positive step" anyway.
"Had Karnataka not cut taxes, it would have collected an additional over Rs 5,000 crore in revenues during the last six months. Gujarat would also have collected Rs 3,500-4,000 core more," he said and added that states that did not reduce VAT earned additional revenues in thousands of crores.
He directly appealed to the Chief Ministers to reduce state fuel tax and pass on the benefit to the citizens. He also pointed out that 42 per cent of the Centre's revenues go to the states. "I request all states that in a time of global crises, we should follow the spirit of cooperative federalism and work together as a team," he said.
The Central government in November had reduced excise duty on petrol and diesel by Rs 5 and Rs 10 respectively. Following the Center's decision, 25 states and Union Territories, mostly ruled by BJP or their allies had reduced VAT on petrol and diesel to give relief to consumers.
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