Fuel taxes: Centre rakes in Rs 3.72 lakh crore, low fundamental excise responsibility limits states’ share

Taxes collected by the Central authorities on petrol went up practically 3 times from Rs 9.48 per litre in 2014 to Rs 27.90 per litre in 2021; nonetheless, the states’ share in these tax collections rose from Rs 0.38 per litre to Rs 0.57 per litre throughout the identical time interval. This relies on knowledge introduced by Minister of State for Finance Pankaj Chaudhary in reply to a query in Lok Sabha on Monday.
In 2014-15, the states’ share within the web proceeds of shareable Central taxes and duties was at 32 per cent, which now stands at 41 per cent. The Finance Ministry knowledge additionally confirmed that the share of cesses and surcharges in gross tax collections went up greater than 4 occasions over the past decade between 2011-12 and 2020-21.
In 2020-21, the Centre collected Rs 4,09,481.16 crore as cesses and surcharges, up from Rs Rs 92,996.51 crore collected in 2011-12. These collections usually are not shared with states. “Cesses and surcharges are not included in the divisible pool as per Constitutional scheme for devolution of taxes,” Chaudhary stated. As per suggestion of the fifteenth Finance Commission, the Centre shares 41 per cent of the tax receipts with states for award interval 2021–26.
Rising collections by means of cesses and surcharges imply that the tax devolution to states falls proportionately. Share of cesses and surcharge in gross tax income has jumped to 19.9 per cent in FY21, from 10.4 per cent in FY12.
Several state finance ministers have argued lately that every one or some portion of the cess and surcharges collected by the Central authorities ought to type a part of the divisible pool, which is shared with the states. The concern of cess and surcharge is at present not throughout the mandate of the Finance Commission, as these collections usually are not a part of the divisible pool.
The authorities must amend Article 269 and Article 270 of the Constitution to make these part of the divisible pool. A cess is imposed on the bottom tax legal responsibility of a company or a person taxpayer, for a particular goal. Surcharge is a tax on tax that the Union authorities can use for whichever goal it deems match.

States’ share in central petroleum taxes remained low as the essential excise responsibility was not raised as a lot as different duties have been hiked. In FY21, the Centre collected Rs 3.72 lakh crore of taxes (excise responsibility and cess) from petroleum merchandise, from Rs 2.23 lakh crore in FY20. Even as complete excise duties went up multifold on petroleum merchandise, the essential excise responsibility on petrol was raised to Rs 1.4 per litre in 2021 from Rs 1.2 per litre in 2014. Petroleum taxes with states are shared solely out of fundamental excise responsibility. The Centre additionally levies further excise responsibility and cesses on petroleum merchandise.
“Devolution to state governments is made out of the basic excise duty component on the basis of the formula prescribed by the Finance Commission from time to time. Present total Excise duty on petrol is Rs. 27.90 per litre. This includes Basic Excise Duty, which is Rs. 1.4 per litre,” Chaudhary stated.