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Finance minister Dr T M Thomas Isaac refuses tax breather for fuel

Dr Isaac has an economic rationale for his refusal to reduce sales tax.

THIRUVANANTHAPURAM: Surging fuel prices are taking the prices of essential commodities along with it but finance minister Dr T M Thomas Isaac has categorically ruled out even a one percent reduction in the sales tax on petrol and diesel, among the highest in the country. Among the 29 Indian states and 7 Union Territories, Kerala has the sixth highest sales tax and other state levies on petrol at 34.06 percent; it is highest in Mumbai at 48.98 percent.

It also has the sixth highest sales tax and other state levies on diesel, at 26.90 percent; Andhra Pradesh imposes the highest at 30.82 percent. The retail selling price of petrol in the state (Rs 74.28 a litre on September 15) is more than all metros except Mumbai. That of diesel (Rs 63.94 a litre on September 15), however, is more than all the four metros (Delhi, Mumbai, Chennai and Kolkota) by at least Rs 2.

Dr Isaac has an economic rationale for his refusal to reduce sales tax. “If the state government reduces sales tax to compensate for the Centre's whimsical increases in excise duties, it would only decimate the state finances,” the finance minister said. According to him, the Narendra Modi government had increased excise duties on petroleum products 16 times. Excise duty on diesel increased by 380 percent in three years.

Fact is, Dr Isaac, like Narendra Modi, is a tax hawk when it comes to fuel. When the last LDF Government left office, the sales tax on petrol in the state was at an all-time high of 29.01 percent. But in May 2011, right after the Oommen Chandy government took over, the tax on petrol was brought down to 23.07 percent. Ironically, Dr Isaac himself had moved an adjournment motion in the Assembly asking the UDF government to reduce the tax.

Then, one of Dr Isaac’s arguments was that any increase in the price of diesel would hurt Kerala the most as it depended on other states for its essential commodities. Fiscal compulsions forced the Oommen Chandy government to increase the imposition and by the time the Oommen Chandy government was voted out in 2015, the sales tax on petrol had risen to nearly 27 percent. Under Dr Isaac’s supervision, it has shot to over 34 percent. If the oil prices continue its surge, the state is expected to mobilise at least '7000 crore by way of sales tax on fuel alone. Last fiscal, it had secured '6402 crore.

( Source : Deccan Chronicle. )
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