Gujarat and Maharastra Cuts VAT on Petrol, Diesel

In a pre-Diwali bonanza for people of the poll-bound Gujarat, the state government today reduced the value added tax (VAT) on petrol and diesel by 4 per cent.
Maharashtra government on Tuesday slashed the tax, bringing down petrol and diesel prices by Rs 2 and Rs 1 a litre respectively from midnight. The announcement comes on the day the Gujarat government became the first state to slash VAT on fuel.
In Gujarat, the Opposition Congress cried foul, alleging that the step has been taken by the government with an eye on the upcoming state poll and is a result of the pressure built up because of the response to Congress Vice-President Rahul Gandhi’s campaign tour in the state.
“After the central government’s instructions, Gujarat has decided to reduce VAT on petrol and diesel by 4 per cent from today mid-night,” Chief Minister Vijay Rupani said.
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, he said. The effective price of petrol in Gujarat from mid-night today will be Rs 67.53 per litre and that of diesel Rs 60.77 per litre, the chief minister said.
The state earns around Rs 12,000 crore per annum through VAT. Because of the reduction in VAT, the state government now stands to lose out Rs 2,316 crore annually. The Gujarat government earlier used to charge 24 per cent VAT on petrol and diesel and an additional 4 per cent cess. Now, the effective VAT will be 20 per cent plus the 4 per cent cess.
The last time the state government had hiked VAT on fuel was in January 2016 when the international crude prices were falling. “We have taken this decision in the interest of the people. The decision should not be considered to have any links with the polls. This is only aimed at giving relief to the people and it is a permanent decision,” Rupani said.
The lowering of tax in poll-bound Gujarat follows Union Finance Minister Arun Jaitley recently writing to all state governments, nudging them to reduce taxes on petrol and diesel. The Centre had recently brought down the excise duty on petrol and diesel by Rs 2 per litre.
“The rate reduction has been done with an eye on polls. They (government) have come under pressure after looking at the response Congress Vice-President Rahul Gandhi has been getting during his campaign tour in Gujarat,” Congress’ spokesperson Shaktisinh Gohil said.
Chief Minister Vijay Rupani said his government decided to reduce the VAT by 4 per cent. He said the annual income of the state government will go down by by Rs 2316 crore. With immediate effect from midnight, petrol and diesel in Gujarat will be Rs 67.53 and Rs 60.77 per litre respectively.
“Some days back, Central Government had announced cut in excise on fuel and it had also recommended state governments to consider change in their taxation so that people of the country can have relief in charges of petrol and diesel. Elections are coming in Gujarat, but not in other states. Plus, this is going to be a long term and steady rate,” said Rupani.
In Maharashtra, the decision to reduce the value added tax (VAT) on petrol and diesel was taken in state cabinet on Tuesday. With the central government slashing the excise duty by Rs2 a litre last week and the state govenrnment’s decision to follow suit, the selling price of petrol will be Rs75.58 a litre in Mumbai.
The decision to reduce VAT will result in a loss of Rs3,067 crore a year — Rs940 crore due to loss on petrol, Rs1,075 crore on diesel and Rs1,052 crore on central tax. The state government levies 25% VAT on petrol in Mumbai, Thane, Navi Mumbai and 26% in the rest of the state and a surcharge of Rs11 a litre across the state. For diesel, the VAT is 21% in Mumbai, Thane and Navi Mumbai and 22% in rest of the state, with a surcharge of Rs2 a litre across the state. The state government earns more than Rs19,000 crore from VAT on diesel and petrol.

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