The Gujarat government today cut the Value Added Tax (VAT) on fuel by 4%, becoming the first state to do so. After the reduction in VAT, petrol will get cheaper by ₹2.93 per litre and diesel by ₹2.72 per litre in the state. This comes after the Centre cut excise duty on fuel by ₹2/litre, asking states to cut VAT.
The Gujarat government on Tuesday cut down value added tax (VAT) on fuel by 4 per cent. It will result in reducing the price of petrol by Rs 2.93 per litre and diesel by Rs 2.72 per litre, Gujarat Chief Minister Vijay Rupani said.
This came after the Centre had cut excise duty by Rs 2 per litre and wanted states to cut sales tax or VAT on petrol and diesel by 5 per cent to provide further relief to consumers.
“We have proactively cut excise duty. Now it is the turn of states to reduce VAT,” Oil Minister Dharmendra Pradhan had said. Also read: 54,000 Petrol Pumps Across Nation to Pull Down Shutters on October 13
Unlike the Centre, states levy VAT as an ad valorem duty which rises every time there is an increase in price.
Pradhan said tha the Centre has sacrificed Rs 26,000 crore in revenue in the cut in excise duty. “States are the biggest beneficiary. 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 used to finance centrally sponsored schemes in states,” he said.
The Centre had raised excise duty by Rs 11.77 per litre on petrol and Rs 13.47 a litre on diesel between November 2014 and January 2016 to take away gains arising from plummeting international oil rates.
Last week, it reduced excise duty on petrol to Rs 19.48 per litre from Rs 21.48 per litre and on diesel to Rs 15.33 a litre from Rs 17.33 previously. As a result of the excise duty reduction, petrol price were cut by Rs 2.5 per litre and diesel by Rs 2.25.
States impose VAT ranging from 26 per cent to 38 per cent. “I urge all states to reduce VAT by 5 per cent in line with the cut in central excise duty to provide farmers and consumers with one more slab of relief.”
The government in June junked 15-year practice of fortnightly revision in rates and moved to daily changes in petrol and diesel in line with international oil movements.