Maharashtra, poll-bound Gujarat, HP reduce VAT on petrol, diesel

Mumbai, October 10

Maharashtra and the election-bound states of Gujarat and Himachal Pradesh today announced cuts in value added tax (VAT) on petrol and diesel, effective from midnight, to bring down fuel prices in the three states.

While BJP-ruled Maharashtra and Gujarat announced a 4 per cent VAT cut, the Congress-ruled Himachal cut VAT by 1 per cent. 

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The net reduction in petrol and diesel prices will be Rs 2.33 and Rs 1.25 per litre, respectively, in Maharashtra.

The move follows a communication from Finance Minister Arun Jaitley to all states to consider reducing state-level taxes on petrol and diesel products.

Mumbai Petroleum Dealers Association chief 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 Rs 9 per litre. This pushed up prices of petrol and diesel by nearly 50 per cent for every litre. 

Gujarat Chief Minister Vijay Rupani said after the VAT reduction, petrol price would slide by Rs 2.93 a litre and that of diesel by Rs 2.72.

The reduction comes after the government cut prices of auto fuel by 60 paise soon after the Centre’s decision to reduce basic excise duty by Rs 2 per litre from October 4.

The decision would put a burden of Rs 2,316 crore a year on the state exchequer. Gujarat annually earns Rs 12,000 crore by way of VAT.

Himachal Pradesh reduced the VAT by 1 per cent. The decision was taken at a Cabinet meeting chaired by Chief Minister Virbhadra Singh. The prevailing rate of VAT is 27 per cent on petrol and 16 per cent on diesel. The move will accrue a benefit of Rs 41 crore to the consumers.

Though the exact price difference cannot be worked out on account of fluctuating rates, the move is expected to  bring the rates down by  50 to 70 paise a litre. — TNS/Agencies