Published: Thu, October 12, 2017
World | By Paul Elliott

Uttarakhand, Himachal Pradesh cut Value-Added Tax on petrol and diesel

Uttarakhand, Himachal Pradesh cut Value-Added Tax on petrol and diesel

Yesterday, three states of Maharashtra, Gujarat and Himachal Pradesh had announced cut in Value-Added Tax rates on the two fuels.

The Uttarakhand government has made a decision to reduce the value added tax (VAT) on petrol and diesel by 2%, state Finance Minister Prakash Pant said on Wednesday. While in Gujarat it was lowered by 4%, Maharashtra cut the price on petrol and diesel by Rs 2 and Re 1 per litre.

Last week, the Centre government had cut excise duty on petrol and diesel by Rs. 2 per litre.

A discount of 49 paise per litre on petrol and 41 paise per litre on diesel will be available for users of government's flagship Bhim App to make payment.

While Karnataka Chief Minister Siddaramaiah ruled out any rollback in VAT on auto fuel, Additional Chief Secretary (Finance) I.S.N. Prasad said he doubted if all States would agree for GST, during the next at least a year or so until the new tax regime stabilises. Himachal Pradesh also reduced the Value-Added Tax by 1 per cent. He added that motor spirits accounted for around 20 to 22% of the VAT collection with Rs 18,353.49 crore of the 90,985 crore VAT collections in 2016-17 coming from VAT on petrol and diesel.

"However, if there is scope for giving further relief we will consider it", he said. Looking at the backlash over high petrol prices however, the Centre has slashed tax on petrol by Rs 1.17 per litre. The VAT component varies across cities and the percentage is decided by individual state governments.

Maharashtra continues to have the highest tax structure for petrol compared to neighbouring states. Centre's revenues from petroleum products nearly doubled from ₹1,72,066 crore in 2014-15 to ₹3,34,534 crore in 2016-17, while it would part with 42% of the earnings with the State governments.

The Central government had earlier instructed the state governments to bring down the taxes to help the consumers.

A mere Rs 2 reduction in excise duty recently amounts to around Rs 26,000 crore reduced collections annually (around 10 percent of total collections from fuels). Petrol and diesel, on the other hand, are basic needs for retail and commercial consumers.

Petrol and diesel rates surged to a three-year high across the country.

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