Just 4 states and one union territory have cut local sales tax or VAT on petrol and diesel since the October 2017 decision of the Centre to reduce excise duty on the two fuels, Oil Minister Dharmendra Pradhan said today. As petrol and diesel prices soared to a three-year high, the Centre on October 3, 2017 reduced excise duty on petrol and diesel by Rs 2 per litre each and asked states governments to match it with a cut in VAT. In a written reply to a question in the Lok Sabha, Pradhan said: "Four state governments and one Union territory have reduced the VAT on petrol and diesel." He did not name the states. BJP rules as many as 19 states in the country. The states which reduced VAT following the October 3, 2017 cut in excise duty were Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh. The excise duty cut announced on October 3, 2017 was the only time the BJP-led government at the Centre has cut excise duty.
In contrast, the government had raised excise duty on nine occasions to take away benefits of sliding international oil prices between late 2014 and January 2016. Pradhan, in the written reply which was posted on Lok Sabha website, said prices of petrol and diesel were freed from administrative control from June 26, 2010 and October 10, 2014, respectively. "Since then, the public sector oil marketing companies (OMCs) take appropriate decision on pricing of petrol and diesel in line with international product prices and other market conditions," he said. They apply Trade Parity Pricing methodology to compute the retail selling price (RSP) of petrol and diesel, which is linked to the international product prices. Other cost elements in the RSP are excise duty, VAT, BS- IV premium, marketing cost and margins and dealers commission, he said adding the excise duty cut was aimed at giving relief to the consumers. However, the spurt in international prices since then have negated the reductions and retail rates are more than October. Petrol price today touched a four-year high of Rs 73.31 per litre in Delhi and diesel is at an all-time high of Rs 64.14. The price of petrol was Rs 70.88 a litre in Delhi on October 3, 2017 when excise duty was cut. Diesel on that day was priced at Rs 59.14. After cutting excise duty, "The central government also requested the state governments to make reduction in VAT imposed by them on petrol and diesel so as to give more relief to the consumers," Pradhan said.
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