'Hike in fuel excise to result in $21 billion tax collection increase,' says Moody's

government's hike in fuel excise amid Coronavirus pandemic will result in tax collection increase by about 21 billion dollars if tax is maintained properly for a year, stated Moody's Investors Service on Wednesday. According to Senior Vice President for Corporate Finance at Moody's Vikas Halan, hike reinforces importance of oil marketing companies to government and validates support incorporated in credit assessment of se companies.

In a statement, he furr said that tax hike could result in higher working capital outflow for oil marketing companies, which will partly offset working capital savings from lower inventory costs.  government on Tuesday hiked excise duty on petrol by Rs 10 per litre and that on diesel by Rs 13 a litre to mop up gains arising from international oil prices falling to a two-decade low. This is second hike in excise duty in less than two months that will help government to garner over Rs 1.7 lakh crore in additional revenues annually at 2019-20 level of consumption. 

Read: Punjab government increases VAT on petrol, diesel; rate to go up by Rs 2 per litre

States impose VAT on fuel 

Delhi government on Tuesday increased Value-Added Tax (VAT) on petrol and diesel resulting in rise in price of two fuels. While petrol price has increased by ₹1.67 per litre, price of diesel has increased by ₹7.10 a litre. While Haryana government recently hiked tax by ₹1 per litre on petrol and ₹1.1 per litre on diesel, Tamil Nadu government hiked VAT by ₹3.25 per litre for petrol and that of diesel by ₹2.50 per litre.

Read: RSS details Covid seva: 67k places, 3.42 lakh workers; 50.5 lakh ration kits; 3.2 cr meals

Meanwhile, Punjab government on Tuesday night increased VAT on diesel from 11.80 per cent to 15.15 per cent and on petrol from 20.11 per cent to 23.30 per cent. Moreover, prices in entire Punjab will be costlier than that of Union Territory Chandigarh as present price of petrol and diesel in UT Chandigarh is Rs 65.82 and Rs 59.30 a litre respectively.

Read: Delhi govt increases VAT on petrol & diesel; prices hiked by ₹1.67 & ₹7.10 respectively

Read: Petrol-Diesel excise hiked by Rs 10, 13; price rise for buyers; Rs 1.6 lakh cr windfall