Tax Relief

Gasoline tax relief: a welcome transfer

The decision of the Union government to change the excise duties on petrol and diesel 5 and 10 per liter is a welcome step. That newspaper had argued that persistently high tariffs on gasoline and diesel had been a negative fiscal stimulus despite the surge in international crude oil prices last year. While the latest decision hasn’t brought excise taxes back to pre-pandemic levels, the price relief is not insignificant. The cut in fuel prices will also dampen the future inflation outlook, although the international rise in commodity prices is worrying.

The Bharatiya Janata Party (BJP) has criticized the opposition-ruled states for failing to lower their state taxes. The opposition is demanding a higher cut from the center. We will also see the usual decoupling of international prices and gasoline-diesel prices as the elections in Uttar Pradesh and other states draw closer.

But as the political and political debates about fuel prices gain momentum, the timing of the price cut begs the question of whether politics or economics was the trigger. Important government officials have established high taxes on fuels in the past. The tax cut came immediately after the loss of the BJP in secondary surveys in Himachal Pradesh and Rajasthan. Certainly, there is nothing wrong with a government looking to the election results in order to optimize its policy. Indeed, the BJP has shown remarkable agility in correcting course after election declines due to economic dissatisfaction. The best example of this is the announcement of the PM-KISAN program following the BJP’s defeat in the 2018 elections in Madhya Pradesh, Rajasthan and Chhattisgarh.

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