States should reduce VAT on petrol, diesel by five per cent: Dharmendra Pradhan

NEW DELHI: The central government has urged state governments to reduce sales tax or value-added tax on petrol and diesel by five per cent, so that the consumers across the country can get the benefit of Rs 2 cut in excise duty announced by the finance ministry on Tuesday.

The move puts the onus on non-Bharatiya Janata Party (BJP)-ruled states to respond immediately. BJP-led National Democratic Alliance governs 18 out of the 29 states in the country. “We have proactively cut excise duty. Now it is the turn of states to reduce VAT (value-added tax),” Minister for Petroleum and Natural Gas Dharmendra Pradhan told reporters here on Wednesday. He noted that Finance Minister Arun Jaitley will soon write to all state chief ministers stressing the need to benefit the consumers. “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 pointed out.

The minister stressed that state governments impose VAT as an ad-valorem duty which further increases the price of these two fuels in states, on every occasion the Centre increases the price. He also pointed out that the cut in excise duty on Tuesday lowered the petrol price for consumers by Rs 2.5 per litre and diesel by Rs 2.25 per litre.

Pradhan reiterated that the decision to reduce excise duty means a revenue loss of Rs 26,000 crore to the central government. The excise duty on petrol was down to Rs 19.48 from Rs 21.48 a litre and on diesel to Rs 15.33 from Rs 17.33 a litre previously.

Responding to another price-related question on surge pricing adopted by the oil companies, Pradhan said: “It helps any benefit to consumers instantly.”

In June, the government introduced the option of surge pricing, ending the practice of fortnightly revision in rates followed for the last 15 years. This allowed oil companies to fix rates of petrol and diesel in line with the changes in the international oil prices.