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Civil aviation minister Jyotiraditya Scindia’s appeal to state governments to reduce VAT on jet fuel signals a positive intent in shoring up the embattled airlines segment. But the problem is that the common man always gets sandwiched between high taxation by both Central and state governments on petro-fuels. It is not easy being a middle-class Indian. Bound by various societal pressures and crippled by limited income sources, the average Indian continues to bear consequences of the exchequer’s exigencies. The rise in expenses for the common man has unfortunately coincided with a fall in income levels. Even before the Covid-19 pandemic struck, the economy was witnessing sluggish growth. Many citizens are now facing a battle to stay afloat and the tax system in our country is akin to the unwanted guest who will never leave the house.
The government’s response to rising fuel prices and its reluctance to reduce tax on products in the pandemic environment is symptomatic of a straitjacketed approach. Besides pushing for more loans at the retail level, the government needs to be more flexible on tax-related issues on some segments as it will help boost demand. There is an urgent need to reduce the burden of taxes, especially on fuel, to provide temporary relief to citizens battling the debilitating impact of the coronavirus pandemic.
Most states hiked VAT last year due to fear of tax shortfalls, however, even as tax collections have improved, they are yet to reverse the VAT hikes. Ideally, there should have been a moderation of VAT and some moderation in excise rates to help lower the retail price of fuel. With the Covid-19 overhang set to stay for sometime, the Centre and state governments need to devise ways for a convenient tax structure.
Even if a few states can respond by reducing taxes on jet fuel, it would send a positive indication and other states might at least feel the need for tokenism. Under the circumstances, even that seems like a meaningful contribution.