Days after Oil Minister Dharmendra Pradhan urged the state governments to cut the value added tax or VAT on petrol and diesel, two BJP-ruled states Gujarat and Maharashtra have today slashed the VAT on fuel. While the Gujarat government cut the fuel prices by 4 per cent, the Maharashtra government reduced petrol and diesel prices by Rs 2 and Rs 1 respectively. In both the states, new rates will be effective from midnight. The Central government had earlier instructed the state governments to bring down the taxes to help the consumers.
Gujarat Chief Minister Vijay Rupani today at a press meet said: "After the central governments instructions, Gujarat has decided to reduce VAT on petrol and diesel by 4 per cent from today mid-night." With this rate cut, the price of petrol will come down by Rs 2.93 and that of diesel by Rs 2.72 in the state. The effective price of petrol in Gujarat from midnight will be Rs 66.53 per litre and that of diesel Rs 60.77 per litre. However, after this move, the state government will suffer a loss of Rs 2,316 crore per yeary. "But we have taken this decision in the interest of people," Rupani said.
Hours after the Gujarat government announced the tax cut, Devendra Fadnavis government also came out with tax reduction on fuel. The Maharashtra government currently levies 26 percent VAT on petrol and 24 percent on diesel in Mumbai, Thane and Navi Mumbai. However, the taxes on fuel will now come down by Rs 2. After the new rates come into force, petrol will cost Rs 75.58 per litre and diesel will cost Rs 59.55 in the state. The reports also suggest that the current rate cut will cost the state exchequer nearly Rs 2,600 crore.
These decisions have come days after Dharmendra Pradhan requested the state governments to reduce VAT on fuels. "It is the responsibility of states to reduce VAT. Every state has different VAT rates on fuel and if each of them reduce by 5 per cent, consumers will benefit," Pradhan said adding many states levy VAT on auto fuel at 24-26 per cent. Pradhan had also said that Finance minister would write to the Chief Ministers of all states urging them to reduce VAT on petrol and diesel.
Earlier this month, the central government had reduced excise duty on petrol and diesel by Rs 2 a litre. The government was under pressure from people and as well as the opposition parties for keeping fuel prices high -due to excise duty- while global prices remained low. Recently, the petrol price in the national capital touched Rs70.83 per litre, highest since 16 January. The government had in November 2015 and January 2016 raised excise duty on petrol and diesel five times to take away gains arising from plummeting international oil prices.
On October 4, Finance Minister Arun Jaitley had nudged the states governments to cut VAT on petrol and diesel to provide relief to consumers from high fuel prices. The Finance Minister said the Rs 2 per litre cut in excise duty on fuel was done to give relief to consumers. "Now it is up to state governments if they are concerned with the issue (to cut sales tax or VAT)," Jaitley said. He further said that states governments such as Kerala and Delhi were at the forefront of demanding a cut in duties. "And therefore state governments must really look at their own VAT collections," the Finance Minister had said.
(With inputs from PTI)