Neither state nor central government has the capacity to cut down taxes levied on petrol or diesel due to the revenue loss from such an action, an ET report quoted a government official. Opposition parties invoked a strike to protest against shooting rates of fuel products whereas the state and central govt are expecting a cushion from each other.
The anonymous government official said that a cut in excise duty by central government will lead to a direct impact on the fiscal deficit while the state cannot reduce sales tax. Reportedly, the govt has predicted a probable steady in the prices fuel in the coming days soon after the value of rupee is moderate.
As per the website of Indian Oil Corporation Ltd, the prices of petrol and diesel were recorded at ₹88.12 and ₹77.32 a litre in Mumbai respectively, whereas prices in the retail market of New Delhi were ₹80.73 and ₹72.83 a litre. In comparison with all metro cities, Delhi seems to have the cheapest fuel prices because of a low VAT. The central and state governments hold up to 45% of the retail price whereas every state in the country has different value-added-tax.
Statistics suggest that fuel rates have been constantly rising since mid-august with falling rupee and rising crude oil prices.
Higher oil price can dis-balance CAD (current account deficit), which makes consumers liable to pay for the fuel they use. The government can only reduce tax once the income tax and GST can compensate for the cut in reduction thus making govt dependent on fuels for now. States not having a BJP government wants Modi government to look after the issue as they say it has increased up to nine times since 2014.
The government official quoted that inflation has been kept under control by the govt as it was 10.4% in UPA government which is much higher than the current inflation rate (4.5%).