Thread by @VigneshJourno

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War of words broke out between the Centre and States regarding the #exciseduty cut on #petrol & #diesel
@nsitharaman said the cuts were made in cess not shared by States so loss borne by Centre
@ptrmadurai said whichever component you cut from, the State will lose some money

@nsitharaman is right in saying the cut came from cess which is not sharable with States
Note:
> Non-sharable parts (last three rows) is increasing
> Sharable part (first row) is decreasing and is just Rs 1.4/ltr. So a reduction of Rs 8 not possible from just sharable part

>So, by increasing the non-sharable components of excise duties, States were already losing out
>The other issue is, if an amount is collected as a cess, it should be used for the ear-marked purposes, which the CAG found in 2020 that the Centre was not doing.

Back to the issue. So, because the Centre deducted Rs 8 from the cess, it wont decrease States' taxe collections? This question is important as Centre is exhorting States to reduce tax rates.

> Fact: If Centre reduces excise duty, States' revenue will drop too

As seen from above table, as Delhi's sales taxe rate of 19.4% is applied on the sum of base price, excise duty and dealer commission, if the excise duty drops, the State's collections will reduce. In this case Delhi's tax collections came down by Rs 0.83 per litre.

Important note: The reduction in Delhi's tax collections could have been more than Rs 5 had the base price of petrol remained the same. As the crude price increased between April 1 and May 23, the base price went up. If not, had it remained same, the impact would have been higher

Similar to Delhi, each State has a % component on their sales tax. So similar to Delhi their sales revenue will also be hit if the Centre's excise duty is reduced.

The fact that the reduction was not from the sharable component of excise duty only minimised the impact a bit.

Full story online: thehindu.com/data/data-will…

@nihalani_jasmin