Virtually ruling out any cut in excise duty on petrol and diesel, Union Finance Minister Arun Jaitley on Monday urged citizens to pay their taxes “honestly” to reduce dependence on oil as a revenue source. He said any move to cut excise duty on petroleum products could prove to be counter productive.
Jaitley said salaried class pay their due share of taxes, but called on “most other sections” to improve their tax payment record, which is keeping India “far from being a tax-compliant society”.
“My earnest appeal, therefore, to political leaders and opinion makers …would be that evasion in the non-oil tax category must be stopped and, if people pay their taxes honestly, the high dependence on oil products for taxation eventually comes down. In the medium and long run, upsetting the fiscal maths can prove counter-productive,” Jaitley said.
In a Facebook post titled ‘The Economy and the Markets Reward Structural Reforms and Fiscal Prudence’, Jaitley mentioned that central government’s tax-GDP ratio has improved from 10 per cent to 11.5 per cent in last four years. Almost half of this, 0.72 per cent of GDP, accounts for an increase in non-oil tax-GDP ratio.
The level of non-oil taxes to GDP at 9.8 per cent in 2017-18 is the highest since 2007-08 – a year in which our revenue position was boosted by buoyant international environment, he said.
“This government has established a very strong reputation for fiscal prudence and macro-economically responsible behaviour. We know what happened during the Taper Tantrum of 2013. Fiscal indiscipline can lead to borrowing more and obviously increase the cost of debt.
“Reliefs to consumers can only be given by a fiscally responsible and a financially sound central government, and the states which are earning extra due to abnormal increase in oil prices,” Jaitley said.
Taking a veiled dig at senior Congress leader P Chidambaram’s remark that tax on oil should be cut by Rs 25 per litre, Jaitley retorted “this is a ‘trap’ suggestion”. Without naming Chidambaram, Jaitley noted that the “distinguished predecessor” had “never endeavoured to do so himself.”
“It is intended to push India into an unmanageable debt – something which the UPA government left as its legacy. We must remember that the economy and the markets reward structural reforms, fiscal prudence, and macro-economic stability.
“They punish fiscal indiscipline and irresponsibility. The transformation from UPA’s “policy paralysis” to the NDA’s “fastest growing economy” conclusively demonstrates this. The government is aspiring to improve the tax-GDP ratio,” Jaitley said.
Last week, Chidambaram had claimed that it was possible for the centre to cut tax by up to Rs 25 per litre on petrol prices but the Modi-government will not do so. As per government estimates, every rupee cut in excise duty on petrol and diesel will result in a revenue loss of about Rs 13,000 crore. The price of Indian basket of crude surged from USD 66 a barrel in April to around USD 74 currently.