Centre asks states to reduce VAT on fuel

With elections approaching and Opposition stepping up its campaign against high fuel prices, the Centre has put the ball in the states’ court.

A day after reducing basic excise duty on petrol and diesel, the Centre on Wednesday urged states to reduce VAT on fuel by 5 per cent to “help people”. Meanwhile, to drive home the so called attempt to provide relief to the “aam aadmi”, BJP pesident Amit Shah said the Modi government's decision to reduce petrol and diesel prices by `2 shows the BJP’s commitment to giving relief to the common man and farmers at a time when oil price is rising globally.

With elections approaching and Opposition stepping up its campaign against high fuel prices, the Centre has put the ball in the states’ court.

A day after reducing basic excise duty on petrol and diesel, the Centre on Wednesday urged states to reduce VAT on fuel by 5 per cent to “help people”.

Meanwhile, to drive home the so called attempt to provide relief to the “aam aadmi”, BJP president Amit Shah said the Narendra Modi government’s decision to reduce petrol and diesel prices by `2 shows the BJP’s commitment to giving relief to the common man and farmers at a time when oil price is rising globally.

Union finance minister Arun Jaitley will be writing to all state chief ministers urging them to cut VAT on petrol an diesel.

“We have proactively cut excise duty. Now it is the turn of states to reduce VAT,” said petroleum minister Dharmendra Pradhan while briefing the media.

The minister said that unlike the Centre, states levy VAT as an ad valorem duty, which rises every time there is an increase in price and the Centre has “sacrificed” `26,000 crore in revenue in the cut in excise duty.

“States are the biggest beneficiaries. They get all of the VAT collection plus they also get 42 per cent of the Central excise collections. The amount remaining with the Centre is to finance Centrally-sponsored schemes in states,” said Mr Pradhan.

The Centre had 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 petroleum rates.

The excise duty on petrol was reduced to `19.48 per litre from `21.48 per litre and on diesel to `15.33 a litre from `17.33 previously on Tuesday.

This after petrol price rose by `7.8 since early July to reach over threeyear high of `70.88 a litre in Delhi, while diesel prices had risen by `5.7 to touch an all-time high of `59.14 a litre.