Thread by @jamewils

Some 7 months back, I shared an article on my website jamewils.com about decoding the petrol tax..

As the petrol prices touching the sky, let us revisit to understand the great rope tricks played by our Union Finance Minister

The article is here, please read it to understand how the Union Excise Duty is shared between the Union and States.

As now the divisible pool share is a big discussion, we should understand how Union is playing tricks to deny the share from divisible pool
jamewils.com/2017/09/decodi…

In brief, Central Excise have 3 components:

(i) Basic Cenvat Duty
(ii) Additional Excise Duty
(iii) Special Additional Excise Duty

Out of the above three components, only Basic Cenvat Duty is shared with the States!

So rest of the share of basic plus (ii) & (iii) goes to Union

Now let's examine how the great rope trick is played:

Excise Duty on Petrol:

19/09/2017 - ₹21.48/ltr
02/04/2018 - ₹19.48/ltr

So this gives an impression that Central Government done a huge tax cut of ₹2/ltr

But what is the reality?

Let's see

How this ₹2/ltr deduction was done? It's very interesting

Firstly, acut of ₹4/ltr was done on basic excise duty

Secondly, added ₹2/ltr to the Additional Excise Duty Component

So how this formula works out between the shares of Union and States?

Let's see!

The Union share is only diminished only by 32 ps, ie, from ₹17.92/ltr to ₹17.60/ltr now!

While what all States together got is reduced from ₹3.56 to ₹1.88, ie, ₹1.68/ltr

See the table below

Last time, when I shared this article, someone pointed out that while Kerala is enjoying a share of 2.5% from the divisible pool, it's not only the share from the sales from Kerala alone but all India share. TRUE, I admit that fact.

But check, how much is our consumption too

The figures for Kerala consumption for 2016-17 is available at ppac.org.in and look at the data, we consumed 3.34% of the all India volume, but in return got only 2.5% of the total share!

Look at the figure of Tamil Nadu, which consumes 7.76% gets only 4.023% from the divisible pool. Karnataka which consumes 6.69% gets only 4.713% from the divisible pool

While UP which consumes 9.3% gets a share of 17.959% & Madhya Pradesh which consumes 4.07% gets a share of 7.548%!!

While we have a difference of opinion about how the share of the divisible pool is divided, we should see that how Union Government is shrewdly reduces the component of Petrol taxes due to States by tweaking tax components!

And this is called the "co-operative federalism" 😛 yep. Another jumla by the Emperor

End.