Govt’s excise collection jumps 48% in April-July; already 3x of full fiscal oil bond liability

Official data revealed that the government’s revenue from the levy of excise duty on petroleum products increased by 48% in the first four months of the current fiscal year, with the incremental mop-up being three times the payback burden of legacy oil bonds for the entire fiscal year.

Excise duty collections increased to over Rs 1 lakh crore in April-July 2021, according to data from the Union Ministry of Finance’s Controller General of Accounts, up from Rs 67,895 crore in the previous fiscal.

Only petrol, diesel, ATF, and natural gas are subject to excise duty since the implementation of the Goods and Services Tax (GST) regime. All other goods and services, with the exception of these, are subject to the GST.

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The government’s incremental collections of Rs 32,492 crore in the first four months of the fiscal year 2021-22 (April 2021 to March 2022) are more than three times the Rs 10,000 crore liability it has for the entire year to repay oil bonds issued by the previous Congress-led UPA government to subsidise fuel.

The bulk of excise tax revenue comes from the levy on gasoline and diesel, and with sales going up as the economy improves, industry insiders estimate that incremental receipts in the current fiscal year might be over Rs 1 lakh crore higher than the previous year.

In total, the UPA government issued Rs 1.34 lakh crore in bonds (similar to a sovereign promise to pay in the future) to state-owned oil corporations to compensate them for selling fuels such as cooking gas LPG, kerosene, and diesel at below-cost prices.

According to the finance ministry, Rs 10,000 crore is due to be reimbursed in the current fiscal year.

The Finance Ministry distributes Rs 13,386 crore to 25 states as an RLB award.

Finance Minister Nirmala Sitharaman and then-Oil Minister Hardeep Singh Puri both criticised the oil bonds for limiting budgetary capacity to provide relief to people suffering from near-record-high fuel costs.

Last month, Sitharaman rejected out a reduction in excise duty on gasoline and diesel to lower prices, citing the restrictions of payments in lieu of previously subsidised fuel. She estimated the BJP government’s overall obligation to be Rs 1.3 lakh crore.

The bulk of the excise collections comes from petrol and diesel on which the Modi government had levied record taxes last year.

Last year, excise duty on petrol was raised from Rs 19.98 to Rs 32.9 per litre to recoup gains from international oil prices plummeting to multi-year lows due to decreasing demand.