Vijay Rupani says that the state government will forego revenue of Rs 2,316 crore in a year due to reduction in VAT
Gujarat, which goes to polls in a few weeks from now, has become the first state to reduce value-added tax (VAT) on petrol and diesel. The announcement, made by Chief Mnister Vijay Rupani on Tuesday, comes a few days after the Centre lowered excise duty on fuel and asked the states to lower the VAT as well. Rupani announced that VAT on petrol and diesel was being reduced by 4 per cent, which will lower the price of both by a little under Rs 3 per litre.
"Lower VAT rates will come into effect from midnight tonight," the CM told reporters at his official residence in Gandhinagar. Rupani had announced last week that the government would lower the VAT rate soon.
As a result of lower VAT, petrol price in Gujarat will fall by Rs 2.93 to Rs 67.53 per litre, and that of diesel by Rs 2.72 to Rs 60.77 per litre. Gujarat was so far charging 24 per cent VAT and 4 per cent cess on petrol and diesel. The VAT rate will now fall to 20 per cent, while cess will remain unchanged at 4 per cent. Rupani said that the state government will forego revenue of Rs 2,316 crore in a year due to reduction in VAT. For the remainder of the current year, the income loss will be about Rs 1,100 crore. The state government had collected close to Rs 12,000 crore as VAT revenue on the two fuels last fiscal.
Deputy Chief Minister Nitin Patel said that VAT on petrol and diesel is one of the major sources of revenue for the state, but the government has lowered the tax with a view to provide relief to the middle class during the Diwali and vacation season. He, however, added that there is a possibility of VAT revenue going up due to higher demand for fuel on account of lower prices.
The central government had lowered excise duty on petrol and diesel by Rs 2 per litre on October 3. A day later, oil minister Dharmendra Pradhan wrote to states asking them to cut VAT on fuel by 5 per cent. Gujarat has become the first state to lower tax rates, but other states too are expected to follow suit soon.
CHANGE IN VAT
- Until December 2015:
VAT on petrol: 23%
VAT on diesel: 21%
Cess on petrol: 2%
Cess on diesel: 3%
- January 2016:
VAT on both fuels: 24%
Cess: 4%
- From today:
VAT on both fuels: 20% Cess: 4%
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