Maharashtra, Gujarat and Himachal Pradesh on Tuesday announced cuts in Value Added Tax (VAT) on petrol and diesel, effective from midnight, to bring down fuel prices in the three states.
While Bharatiya Janata Party-ruled Maharashtra and Gujarat announced a 4 per cent VAT cut, the Congress-ruled Himachal Pradesh cut VAT by 1 per cent.
The net reduction in petrol and diesel prices will be around Rs2.33 per litre and Rs1.25 per litre respectively in Maharashtra, said All India Petrol Dealers Association spokesperson Ali Daruwala.
The move follows a communication from federal Finance Minister Arun Jaitley to all states to consider reducing state-level taxes on petrol and diesel products.
Mumbai Petroleum Dealers Association president Ravi Shinde said the current VAT in the state was around 26 per cent on petrol and 21 per cent on diesel, plus different cess totalling Rs9 per litre.
This pushed up prices of petrol and diesel by nearly 50 per cent for every litre in the state.
With the VAT cut, the Maharashtra government is likely to suffer a loss of around Rs25 billion.
Gujarat Chief Minister Vijay Rupani said after the VAT reduction, petrol price will slide by Rs2.93 a litre and that of diesel by Rs2.72 a litre. The reduction comes after the state government cut prices of auto fuel by 60 paise soon after the federal government’s decision to reduce basic excise duty by Rs2 per litre from October 4.
Rupani said the decision would put a burden of Rs23.16 billion a year on the state exchequer. Gujarat annually earns Rs120 billion by way of VAT on auto fuels.
Himachal Pradesh reduced the VAT by 1 per cent. The decision was taken at a cabinet meeting chaired by Chief Minister Virbhadra Singh.
Indo-Asian News Service