Gujarat, Maharashtra cut VAT on petrol and diesel
OIL’S WELL Move follows Centre’s decision to cut excise duty on petrol, diesel AHMEDABAD/NEW DELHI:
Electionbound Gujarat on Tuesday cut value-added tax (VAT) on petrol and diesel by 4%, becoming the first state to give relief to consumers from the recent surge in global autofuel price.
The decision announced by chief minister Vijay Rupani in Gandhinagar will make petrol cheaper in the state by ₹2.93 and diesel by ₹2.72 a litre. Gujarat levied 28.96% VAT on petrol and diesel prior to the tax cut.
The move follows the Central government’s decision to cut excise duty on petrol and diesel by ₹2 last week, the first tax cut on fuel by the current government, to tame rising inflation.
The Narendra Modi administration was able to reform the energy market by removing subsidy on petrol and diesel and usher in market pricing because oil prices remained subdued since mid-2014. That trend enabled the government to raise taxes without hurting consumers whenever global prices declined.
With prices of fuel surging in global markets in recent weeks due to bad weather-induced refinery shutdown in the US, the government moved to lower taxes to shield consumers from the price surge.
Addressing media persons in Gandhinagar, the chief minister said the VAT reduction will cost the state exchequer ₹2,316 crore annually, but the decision was taken keeping in mind the interest of people.
After the tax cut, the effective price in Gujarat will be ₹66.53 a litre for petrol and ₹60.77 per litre for diesel, the chief minister said.
Besides Gujarat, the Maharashtra government also reduced VAT on petrol and diesel, making them cheaper by ₹2 a litre and ₹1 per litre, respectively.
Announcing the move, finance Minister Sudhir Mungantiwar termed it as a “Diwali gift” to people of the state.
The revised rates will be applicable from midnight, Tuesday.
“The chief minister has approved a proposal to reduce the VAT on petrol and diesel by ₹2 and ₹1 a litre, respectively. This is our Diwali gift to the masses,” Mungantiwar said.
He said the decision will cause an annual revenue loss of ₹2,000 crore to the state exchequer.
“The government is ready to bear the additional financial burden despite Maharashtra’s economy not being in a good shape,” he said.
The recent spike in autofuel price had an impact on cost of living. Consumer Price Indexbased inflation accelerated for the second consecutive month, by 3.36% in August from 2.36% in July.
Last week, oil minister Dharmendra Pradhan said that raising excise duty on fuel during the low global oil price era also involved a responsibility to bring it down when necessary. Unlike the central government, states levy VAT as a percentage of the price, which leads to higher tax burden when prices go up.
Pradhan said the Centre sacrificed ₹26,000 crore in revenue in the duty cut (the full year impact of the duty cut.) For the rest of the financial year, the impact is ₹13,000 crore.
According to reports, the central government raised excise duty by ₹11.77 per litre on petrol and ₹13.47 a litre on diesel between November 2014 and January 2016 to take away gains arising from plummeting international oil rates.
WITH PTI INPUTS