Choice for government: Fuel tax cut or inflation?

Revenue receipts from Union excise duties have proved to be the silver lining in the 2021-22 Budget, as far as central taxes are concerned. Not only does the government hope to collect, as per Revised Estimates (RE), more than what its Budget Estimates (BE) projected in 2020-21, the 2021-22 (BE) numbers project union excise duties to be the only tax head where 2021-22 (BE) numbers are greater than 2020-21 (BE) numbers. To be sure, 2021-22 (BE) collections are expected to be lower than 2020-21 (RE) collections on this head. Oil minister Dharmendra Pradhan on Wednesday ruled out any cut in excise duty. His remark came on a day the price of petrol rose to an all-time high of .87.60 a litre in Delhi. The diesel rate rose to .77.73 per litre in the city.

1. Rising fuel tax rates contributing to higher excise duty collection

After most indirect taxes were subsumed into the Goods and Services Tax (GST) post 2017, the bulk of union excise duties are receipts from taxes on petroleum products, primarily petrol and diesel.