Maharashtra, Kerala, Rajasthan reduce VAT on petrol, diesel after Centre cuts excise duty

Maharashtra, Rajasthan and Kerala slashed value-added tax on petrol and diesel after Finance Minister Nirmala Sitharaman called for more relief to consumers after Excise tax cut by the centeralthough some other states seemed reluctant to point out that they could not bear more pressure on revenue.

Grand Congress Party leader B On Sunday, Chidambaram wondered if states would be able to forgo revenue of value-added tax (VAT) on gasoline and diesel unless the center delegates more money or gives them more grants, likening their case to being between “the devil and the deep sea”.

The Maharashtra government led by Shiv Sena has reduced the value-added tax on petrol by Rs 2.08 per liter and diesel by Rs 1.44 per liter. A statement issued by the government said the state treasury would bear an annual loss of Rs 2,500 crore as a result of this decision.

However, the DMK-led government in Tamil Nadu said it was not fair or reasonable to expect states to lower their taxes.

State Finance Minister Palanivel Thiaga Rajan said the central government never consulted the states when they increased taxes and that Tamil Nadu had already incurred a loss of over Rs 1,000 crore due to the previous tax cut announced by the Union government in November 2021.

He pointed out that despite the tax cut announced by the center on Saturday, the rates are still high compared to 2014.

“Federal government duties on gasoline have risen significantly in the past seven years. Although federal government revenue has increased diversly, there has not been a comparable increase in revenue for states.

“This is because the Union government has increased the tax and surcharges on petrol and diesel while reducing the basic excise tax that can be shared with the states,” he emphasized.

After the November 2021 reduction in the excise tax on petrol by Rs 5 per liter and on diesel by Rs 10 per liter, 25 states and UT have cut VAT to give further deferment to consumers affected by the record retail price hike. States ruled by non-NDA parties like Maharashtra, Andhra Pradesh and West Bengal did not.

In response to the minister’s comments that the center did not consult the states before the fuel price increase, BJP President Tamil Nadu K. Annamalai asked whether this practice was followed during the previous UPA system, where DMK was a major component.

Speaking to reporters, he gave a “72-hour” ultimatum to the ruling DMK to carry out his promise in the poll on fuel price cuts. The main opposition in Tamil Nadu AIADMK also urged the DMK to carry out its promise in the poll to reduce the prices of petroleum products.

However, the Kerala Left Democratic Front government on Saturday immediately announced a cut in the state tax on petrol and diesel prices by Rs 2.41 and Rs 1.36 per liter respectively, after the fuel price cut by the centre.

The Chief Minister of Rajasthan, Ashok Jahlot, also said that the state government will cut VAT by Rs 2.48 per liter on petrol and Rs 1.16 per liter on diesel.

In Madhya Pradesh, Congress leader Kamal Nath demanded the BJP government to reduce value-added tax on petroleum products to further reduce prices.

Bahujan Samaj Party Chairman Mayawati said it is not only the duty of Uttar Pradesh but other states as well to immediately announce the reduction of value-added tax on fuel.

In the BJP-ruled Karnataka state, Chief Minister Basavaraj Bhumi said his government would consider a further fuel tax cut.

“The (centre’s) decision came Saturday evening, let’s see, we will look into it,” Bomay told reporters here in response to a query.

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Bommai last month did not commit to any further fuel tax cut by the state government and assured that any decision in this regard would be taken after considering the state’s economy.

A Goa government source said the exemption led by Pramod Sawant would not reduce value-added tax on petrol and diesel as it “could hurt the economy”.
Goa charges a value-added tax of 26 percent on petrol and 22 percent on diesel.

The ruling Trinamool Congress in West Bengal has said the state will cut taxes once it lifts the “economic blockade” and releases money owed to the state.

National spokesperson for TMC Sukhendu Sekhar Ray said on Saturday that West Bengal will cut fuel prices once the center clears its Rs 97,000 crore dues.

Last month, West Bengal Chief Minister Mamata Banerjee said she would cut taxes on petroleum products in the state once the central government cleared all outstanding dues owed to the state.

On Sunday, petrol price fell by 8.69 rupees per liter and diesel price by 7.05 rupees per liter after the government’s decision to cut production tax on motor fuels.

Former Finance Minister Chidambaram said states get very little by sharing duties on petrol and diesel.

“I wonder if they can give away that revenue unless the center transfers more money or gives them more grants,” Chidambaram said.

In his series of tweets, he said that the situation is like being between “the devil and the deep sea.”

Announcing the fee cut via tweets, Finance Minister Sittraman urged all state governments to reduce local sales tax or value-added tax.

“I would like to urge all state governments, especially states where the reduction was not made during the last round (November 2021), to implement a similar reduction and give relief to the common man,” she said.

Welcoming the move, Oil Minister Hardeep Singh Puri said: “I want to highlight the fact that despite this second cut in the central tax, the price of petrol and diesel in states like Maharashtra, Rajasthan, West Bengal and Tamil Nadu,

And Andhra Pradesh, Jharkhand and Kerala are still about Rs 10-15 higher than the BJP-ruled states.” Prices vary from state to state depending on the occurrence of local taxes such as VAT. Andhra Pradesh has the highest VAT on petrol and diesel in the country, followed by Rajasthan and Madhya Pradesh which are governed by the BJP.

This (high prices in non-BJP-controlled countries) is due to the refusal of state governments to reduce VAT. “It is time for these countries to wake up and lower the value-added tax to provide comfort to their customers,” said Puri.

The Rajasthan Congress government had lowered the VAT after the November 2021 decision. Punjab, which was ruled by the party at the time, saw the biggest drop due to the lowering of VAT rates.

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