Tamil Nadu finance minister counters Nirmala Sitharaman on fuel price hike

“Truth alone triumphs…especially when it is backed by data and unarguable facts [sic],” he added.

A lot of half-truths and one whole-lie doing the rounds since yesterday…

Detailed statement (print and video versions) coming later today, after I return to Chennai from my Constituency….

Truth Alone Triumphs….especially when it is backed by data & unarguable facts…?

— Dr P Thiaga Rajan (PTR) (@ptrmadurai) August 2, 2022

Response to criticism

Responding to the criticism that the DMK government in Tamil Nadu had not slashed the state taxes on fuel despite the Central government doing so twice — in November 2021 and May 2022 — and the DMK itself promising it in their election manifesto, Thiaga Rajan pointed out that the state government had cut the Value Added Tax (VAT) on petrol by ₹3 per litre in August 2021, even before the Centre first reduced its taxes on petrol and diesel.

“Further, the reduction of taxes by the Union government on petrol reduced the state taxes by ₹1.95 per litre. Therefore, the state taxes on petrol have gone down by a total of ₹4.95 per litre. Similarly, the reduction of taxes by the Union government on diesel has brought down the state taxes by ₹1.76 per litre,” he explained.

The DMK, it may be noted, had promised in its poll campaign that it would reduce petrol prices by ₹5 and diesel by ₹4 per litre.

Highlighting how the Union government “increased the taxes on petrol by ₹23.42 per litre (247 percent) and ₹28.23 (790 percent) per litre on diesel” over the last seven years, thereby increasing its revenue by several lakh crores, Thiaga Rajan claimed that there had not been a matching increase in the revenue to the states.

“This is because the Union government has increased the cess and surcharge on petrol and diesel while reducing the basic excise duty that is shareable with the states,” he said.

Thiaga Rajan also drew attention to how Tamil Nadu faced additional losses in revenue due to the two fuel tax cuts announced by the Centre.

According to his calculation, the state lost about ₹1,050 crore in annual revenue due to the tax cuts announced in November 2021, and a further loss of ₹800 crore because of the tax reduction in May 2022.

‘Inherent issues’ of GST Council

Though Thiaga Rajan is a member of the GST Council, he clarified the government of Tamil Nadu had sent its objection in the form of a letter against the imposition of GST on essential food items as it would have an adverse effect on the common man.

Underlining certain “inherent issues in the basic structure and design of the GST Council”, he said the Union government has a voting right of 33 percent in it, whereas each state — irrespective of how big or small it is — has only 2 percent rights.

“In such a structure, if any decision regarding GST tax imposition is to be stopped by a state government, it requires the full support of 25 states or the support of the Union government,” he said.

The minister also noted that the interim report of the Group of Ministers containing 56 recommendations of tax imposition, which was placed before the GST council, had to either be accepted in its entirety or rejected in its entirety. After the deliberations, the interim report was accepted by the council.

Background

The Lok Sabha on Monday, 1 August, witnessed a stormy session, with the Opposition parties cornering the Central government over the issue of price rise and imposition of GST on essential food items such as rice, flour, and milk.

From the DMK’s side, Member of Parliament (MP) K Kanimozhi led the charge. While comparing the current prices of essential commodities such as cooking oil to the rates of these items in 2014, she tried to highlight that the masses were being increasingly burdened due to the policies of the BJP-led Union government.

“Should a family only eat chutney made of tomatoes and onions as their meal thrice a day?” she asked following a statement by BJP MP Nishikant Dubey about the prices of tomatoes and onions going down.

Sitharaman responded to the charges levelled by Kanimozhi, and chose to address the allegations in Tamil.

In her response, Sitharaman took on the DMK government in Tamil Nadu for not cutting state taxes on fuel despite the Central government doing so twice, and the DMK itself promising it in the party’s election manifesto ahead of the assembly elections in the state.

This led to a war of words between DMK MPs and Sitharaman, with one of the Tamil MPs even calling the finance minister “arrogant”.

Dissatisfied with her response, the DMK MPs and other Tamil MPs staged a walkout from the Lok Sabha.

However, Sitharaman further charged that the decision to impose 5 percent GST was taken unanimously by the GST council, of which Thiaga Rajan was also a member.

She also accused the DMK government of increasing the prices of milk in Tamil Nadu, over and above the recently introduced GST rate.