After the Narendra Modi government announced a relief of Rs 2.5 per litre on petrol and diesel prices, 11 states, mostly the BJP ruled ones, announced additional relief by cutting Value Added Tax (VAT) on fuel, which is applied ad valorem. Maharashtra and Gujarat were the first ones to act on the request of the central government, followed by Tripura and other states.
As a result, the petrol and diesel prices fell drastically in most part of the country, by as much as Rs 4.37 in Mumbai. One litre of petrol is retailing at Rs 86.97 in Mumbai, while in Delhi retailing at Rs Rs 81.50 down from Rs 84, implying a slash of Rs 2.5 a litre. Of the Rs 2.5 a litre relief, Re 1 loss is being absorbed by oil companies, while excise duty cut by the central government is Rs 1.5 a litre.
Here’s full list of states where VAT on fuel has been slashed
- Uttar Pradesh
- Madhya Pradesh
- Arunachal Pradesh
- Himachal Pradesh
Notably, Rajasthan, West Bengal, Karnataka and Andhra Pradesh recently announced a cut in VAT between Re 1-Rs 2. It is unlikely for them to announce any further relief. Kerala had announced VAT cut of Re 1 back in June and has ruled out any further relief.
SBI Chief Economist Soumya Kanti Ghosh has said that states can give up to Rs 3-3.2 a litre tax relief as they have gained more due to higher crude oil prices. The central government had announced an excise duty cut of Rs 2 a litre on both petrol and diesel in October last year.
Source : Economic Times