Centre challenges non-BJP states to cut VAT on fuel

New Delhi: The Centre on Thursday cut prices of petrol and diesel by Rs 2.5 per litre, to give relief to common man as international oil prices were hovering over four years high. The move includes an excise duty cut of Rs 1.5  per litre by the Central government and oil marketing companies absorbing another Re 1 per litre. 

Soon BJP ruled states Maharashtra, Gujarat, Assam, MP, UP, Tripura, Himachal, Chhattisgarh, Jharkhand and Uttarakhand among others announced Rs 2.5 per litre cut in VAT on petrol and diesel prices. J&K, which is under Governor’s Rule cut VAT by Rs 2.5 per litre on the fuel.

The Centre also challenged non-BJP ruled states  “whose leaders were only tweeting and indulging in lip sympathy” to too cut VAT on the fuel so that consumer gets a bigger relief. However, opposition ruled states remained non-committal on reducing VAT. 

Karnataka and Kerala indicated that they will not be reducing local duty on fuel. Kerala state finance minister T.M. Thomas Isaac said it would adversely affect the state’s revenue. 

West Bengal Chief Minister Mamata Banerjee and Delhi Chief Minister Arvind Kejriwal demanded that the Centre cut excise duty by Rs 10 per litre on petrol and diesel. West Bengal, Karnataka, Rajasthan and Andhra Pradesh states had recently themselves cut VAT on fuels. 

Union finance minister Arun Jaitley said that cut in fuel prices was a good economics as it will increase the purchasing power of consumer without hitting the fiscal deficit target. 

“And reducing oil prices, if you say is good politics, so be it,” said Mr Jaitley. Centre will issue notification on cut in excise duty by Thursday midnight so that consumers get immediate relief. 

The finance minister asked state governments to match the move with a similar reduction in sales tax or VAT and it will be a test for those states whose leaders were only tweeting and indulging in lip sympathy. 

“What will they do now and last time also only the BJP and NDA-led state governments reduced VAT. This time if other state governments do not do it then people will ask them,” he said.

Mr Jaitley said that since states taxes on petrol and diesel was on ad valorem basis, they will only have to forego additional revenue which came after oil prices had started rising.