Collections from central excise duty have surged almost three times during the two-month period of April-May on a yearly basis, according to government data. When compared with 2019 numbers, it showed a growth of over 100 per cent. Post the introduction of Goods & Services Tax (GST) in 2017, petroleum products — petrol, diesel and aviation turbine fuel (ATF) — have been the main contributors to central excise.

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Data from Controller General of Accounts (CGA) show that collection from central excise duty jumped to around ₹37,000 crore in the April-May period against ₹11,000 crore during the corresponding period in 2020. Further breakup shows that collection in April was very low, while May saw a pick-up. This is a routine trend as April normally sees more refund, which means net collection (gross minus refund) will be very low or even negative.

The consumption of petrol and diesel have dropped in May compared to April and air traffic has also declined. Though there were no restrictions on the movement of goods carriers or flights, local lockdowns had some impact, resulting in lower consumption. This, however, did not deter revenue as the taxation component is very high on fuel.

Series of duty revisions

As on date, the Centre levies ₹32.90 a litre as a combination of duties (basic excise duty and special additional excise duty) and cess (road and infrastructure cess and agriculture infrastructure and development cess) on unbranded petrol and ₹31.80 on unbranded diesel. For branded petrol and diesel, the rate is ₹ 34.10 a litre. As these are specific rates, any change in collection is not affected by change in global prices of oil. However, ATF attracts a basic excise duty of 11 per cent while compressed natural gas attracts 14 per cent.

One of the reasons for better collection, even when consumption was down, could be attributed to a series of duty revisions (mostly upwards) during the last few years. Last year, between March and May, excise duty was raised by ₹13 and ₹16 per litre on petrol and diesel.

Higher rate of central excise duty and of States’ sales are affecting the prospect of bringing petrol, diesel and ATF under GST. As the maximum rate under GST is 28 per cent and even cess is added to it, it will not go beyond 50 per cent (except for tobacco products). At the same time, as these fuels are a key source of earnings for the Centre and if clubbed with alcohol, a major source of revenue for States, no one is willing to bring them under GST, despite political noises.

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