The Gujarat and Maharashtra governments on Tuesday announced slashing value added tax (VAT) on petrol and diesel.
A few days go, Union finance minister Arun Jaitley had written to all state governments to reduce taxes on petrol and diesel after the Centre reduced excise duty on both by `2 per litre.
The Gujarat government has reduced VAT by 4% and the cut will be effective starting the intervening night of Tuesday and Wednesday. The announcement by Gujarat chief minister Vijay Rupani and deputy chief minister Nitin Patel comes just days before Diwali and ahead of Assembly polls in the state in year-end.
Rupani said: “After the Central government’s instruction, we discussed it with the state finance department and have decided to reduce VAT by 4% in larger public interest. Because of this decision, the state government will suffer loss of `2,316 crore. This is for the first time that VAT has been drastically cut by 4% in one go.”
Deputy CM Patel said: “A major portion of the state government’s revenue — about `12,000 crore — comes from VAT. Yet the decision to reduce the duty on petrol and diesel has been taken in anticipation of the overall rise in revenue.”
With this cut, the price of petrol would come down by Rs 2.93 to Rs 66.53 per litre and diesel by Rs 2.72 to Rs 60.77 a litre in the state.
In Maharashtra, the announcement to cut VAT on petrol and diesel was made by state finance minister Sudhir Mungantiwar who termed it a “Diwali gift” for the people. “The chief minister has approved a proposal to reduce VAT on petrol and diesel by Rs 2 and Re 1 a litre, respectively. This is our Diwali gift to the masses,” Mungantiwar said. He added that the decision will cause an annual revenue loss of Rs 2,000 crore to the state exchequer.
According to the state government, vehicles entering Gujarat from other states may buy more fuel here, increasing their total sale.