Oil minister urges states to cut VAT on petrol, diesel by 5%

NEW DELHI: Oil minister Dharmendra Pradhan on Wednesday said that petroleum ministry has urged the states to slash VAT (Value Added Tax) on petrol and diesel by 5 per cent, a day after the central government cut excise duty+ on fuel to protect retail consumers from high global crude oil prices.

"States are the biggest beneficiary. They get all of the VAT collection plus they also get 42 per cent of the central excise collections. The amount remaining with the Centre is used to finance centrally sponsored schemes in states," Pradhan said.



He further added that finance minister Arun Jaitley will write to the chief ministers in this regard.

The finance ministry had earlier ruled out lowering excise duty on petroleum products citing pressure on government finances.

"By taking cognizance of the whole scenario, the prime minister has given direction to the finance ministry and the oil ministry to look into this aspect and rightly, I don't see this as an issue of loss or gain," Pradhan told reporters.

"There is about $10 difference between crude oil prices and petroleum prices," Pradhan said.

On Tuesday, the centre cut excise duty on petrol and diesel by Rs 2 per litre. Later, the finance ministry tweeted that the cut will cost the exchequer a loss of Rs 26,000 crore for the full year and Rs 13,000 crore for the remaining part of this fiscal year.


The Centre had raised excise duty by Rs 11.77 per litre on petrol and Rs 13.47 a litre on diesel between November 2014 and January 2016 to take away gains arising from plummeting international oil rates.

BJP-ruled Maharashtra levies 46.52 per cent VAT (47.64 per cent in Mumbai) on petrol, the highest in the country. Andhra Pradesh has 38.82 per cent VAT on petrol while BJP- governed Madhya Pradesh levies 38.79 per cent VAT on the fuel.

BJP-led NDA governs 18 out of the 29 states.

Delhi and Himachal Pradesh levy 27 per cent VAT on petrol while Punjab has 36.04 per cent VAT. Haryana levies 26.25 per cent VAT.


(With inputs from agencies)