Dharmendra Pradhan asks states to slash VAT on petroleum

After cutting excise duty by Rs 2 per litre, Union Petroleum Minister Dharmendra Pradhan has asked the states to slash the Value-Added Tax (VAT) on fuel by 5 per cent. "We have proactively cut excise duty. Now it is the states' turn to reduce VAT. Unlike Centre, states levy VAT as an ad valorem tax which rises every time there is an increase in price," he said.

He added that Centre has sacrificed Rs 26,000 crore in revenue while cutting excise duty.

"States are the biggest beneficiary. They get all of the VAT collection, and in addition 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," he said.

He said states impose VAT ranging from 26 per cent to 38 per cent. "I urge all states to reduce VAT by 5 per cent in line with the cut in central excise duty to provide farmers and consumers with one more slab of relief."

Pradhan also defended the daily revision in fuel prices saying it helps pass on benefits to consumer instantly.

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. Pradhan said as a result of the excise duty reduction, petrol price has been cut by Rs 2.5 per litre and diesel by Rs 2.25.

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.