Oil Minister Dharmendra Pradhan asked states to pitch in and slash the VAT on fuel by five percent to help the inflating costs. This comes after excise duty was cut by Rs 2.
If states slash VAT (on fuel) by five percent, consumers will get more relief... We urge states to take responsibility, just like the centre did, for the benefit of consumer interest... Finance Minister will be writing to all the states (regarding slashing VAT levied on fuel).
The government on Tuesday, 3 October, cut excise duty on petrol and diesel by Rs 2 per litre to moderate the relentless rise in fuel prices witnessed since the last three months.
After the Centre taking a hit of Rs 26,000 crore by cutting excise duty on oil, Finance Minister Arun Jaitley on Wednesday nudged states to cut sales tax or VAT on petrol and diesel to provide further relief to consumers from high fuel prices.
Now it is up to state governments if they are concerned with the issue (to cut sales tax or VAT).
Referring to opposition ruled states, he said some state governments, particularly in Kerala and Delhi, were at the forefront of demanding a cut in duties.
Jaitley said a large part of taxes collected on petroleum products goes to states. Besides their own VAT collection, they also get 42 percent of central duties.
And so, states must also bear a part of the impact, he said, adding that the revenues of both the Centre and state governments would be impacted by duty cuts, but an upward movement in the economy would give adequate space for covering up of the lost revenue.
When global oil prices are high, there is some kind of cushion required to be provided as far as consumers are concerned. Therefore, we have taken a conscious decision to that effect.
Asked if BJP-ruled states would also be nudged to cut VAT, he said, "I think the states manage their finances, and I am sure states are also close to their own people." States that levy VAT as high as 40 percent will "adequately factor this concern in," he said.
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