Despite Govt Push, States Stall Cutting VAT On fuel



The move to get states to cut value added tax (VAT) on petrol and diesel seems to have stalled after Gujarat, Maharashtra, Himachal Pradesh, Madhya Pradesh and Uttarakhand reduced the tax last month to ease the burden of rising global oil prices on consumers.

The five states pruned VAT on fuels after the Centre early last month shifted the onus on state governments by slashing excise duty on petrol and diesel by Rs 2 per litre to shield consumers from nearly 29% rise in oil prices and tame inflation. “We have requested all the states (to cut VAT) and I am sure that all the states will revisit their tax structure. Consumer interest is top priority. Just like excise duty has been cut by the Centre keeping consumer interest in mind, states will also follow suit,” oil minister Dharmendra Pradhan had said shortly after the excise duty reduction. Finance minister Arun Jaitley too had urged states to reduce VAT on petroleum products.

With oil prices hovering around $60 a barrel and prospects of domestic prices rising, the need to get states to cut VAT on fuels has gathered urgency. But barring the five states — four of them ruled by the BJP — other states have been reluctant to heed the Centre’s plea. Bihar, where the BJP is part of the government in alliance with Nitish Kumar’s JD(U), and Left-ruled Kerala have so far declined to cut VAT. Fear of losing revenue is a key concern among states. VAT on petrol and diesel forms a substantial chunk of revenue for most state governments.


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