Excise duty helps fill Centre’s fiscal gap

What is the News?

According to the data from the Controller General of Accounts (CGA), Excise duty mostly from petrol and diesel has helped the government overcome a major gap in its revenue in FY21.

How much tax do we pay on petrol and diesel?

• • The Union government levies excise duty and cess on fuel and states levy a value-added tax(VAT).
  • Taxes together constitute 58% of the retail selling price of petrol and around 52% of the retail selling price of diesel at present.

How much did the Centre earn on excise duty from Petrol and Diesel?

• • The receipts from excise duty collected mostly from petrol and diesel has increased by almost 63% to ₹3.89 trillion in FY21 from the year-ago period.
  • Moreover, the sharp rise in excise duty receipts has also helped to boost overall tax collections.

What about GST and Direct Taxes?

• • The receipts from goods and services tax (GST) revenue has reduced by 7.6% in FY21 to ₹4.56 trillion.
  • On the direct tax side, the share of corporate tax collections in the Centre’s gross tax receipts too declined in FY21 from a year ago while that of personal income tax remained more or less the same.

Why has Excise Duty from Petrol and Diesel became a major revenue for the Government?

• • The government of India has given full tax rebate to those with taxable incomes of up to ₹5 lakh and revamped the tax slab system to offer a flexible alternative plan to those who do not avail of tax incentives.
  • In addition, businesses not availing incentives and new factories were offered a concessional tax rate regime.
  • Hence, due to this collection of excise duty from Petrol and Diesel has become the preferred revenue source for central and state governments.

Source: Livemint