Centre Wants States To Cut VAT On Petrol, Diesel By 5 Per Cent

Centre Wants States To Cut VAT On Petrol, Diesel By 5 Per Cent

The Centre wants states to do their bit in bringing down fuel prices by slashing state taxes following Tuesday’s cut in central excise duty on petrol and diesel.

“We have taken responsibility, keeping in view the interest of farmers and consumers, and reduced excise duty by Rs 2 per litre. In the same way, states too should take responsibility and cut value added Tax (VAT) by 5 percentage points,” oil minister Dharmendra Pradhan said. “This would bring further relief to consumers.”

Finance minister Arun Jaitley, who is on a three-day official visit to Dhaka, said thecut in excise duty on petrol and diesel was done to give relief from relentless increase in prices and leave more money in hands of consumers. “Now it is up to state governments if they are concerned with the issue (to cut sales tax or VAT),” he added.

Jaitley would shortly write to chief ministers of all states to cut VAT, Pradhan said, adding that he was hopeful that states would slash in response to Centre’s request cutting across party lines.

The central government will lose Rs 13,000 crore in revenue in 2017-18 due to the cut in excise duty on petrol and diesel. But the revenue loss wouldn’t impact the Centre’s social spending, Pradhan said. Domestic prices of petrol and diesel are linked to international rates that have soared for a month following strong demand for fuel, refinery shutdown due to hurricanes in the US, and tighter supply of crude oil.

After diesel touched a record high on Monday in Delhi, the central government responded by cutting excise duty by Rs 2 per litre with effect from Wednesday. This brought down price of diesel and petrol by Rs 2.25 and Rs 2.5 per litre respectively on Wednesday in Delhi. Other states too saw similar fall. Central and state taxes make up nearly half of retail prices of fuel. Read more

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