Linking VAT on fuel to welfare schemes, TN refuses any cut

Fisheries Minister D Jayakumar on Monday said the state was toeing the line of late Chief Minister J Jayalalithaa, who had vociferously opposed the taxation rights on fuel. “The source of income for the state is primarily from petroleum products and liquor meant for human consumption. 

These are revenue generating sources,” Jayakumar said.

On a possible cut on value added tax (VAT) by the state government with fuel prices soaring to new highs, he reasoned that the state has envisaged welfare measures to the tune of Rs 77,000 crore to various segments, including Adi Dravidars and Backward Classes. While both petroleum products and liquor sales are covered under the VAT regime, Jayakumar wondered how the government would be able to provide for the welfare schemes without money. “The government spends nearly 70 per cent of its revenue receipts towards salaries of its employees,” he added.

On the possible inclusion of fuel under the GST regime, he said the state would not forego its rights on taxing fuel and IMFL. “If it goes to the GST regime, it would go to the Central Pool and we would have to look up North for devolution to a maximum of 50 per cent,” Jayakumar said.

A senior official said cutting state-imposed VAT on fuel would adversely affect the State’s Own Tax Revenue (SOTR). “The total SOTR for fiscal 2018–2019 estimated at Rs 1.12 lakh crore, which comprises revenues under the State Goods and Services Tax and the InterState Goods and Services Tax, directly form part of the Commercial Tax revenues while the state’s tax on petrol and diesel and tax on the sale of Indian Made Foreign Liquor form the other important sources of revenue under Commercial Taxes,” the official said. “The tax revenue generated from petrol and diesel is crucial.”