New Delhi/Bhubaneswar: The Centre urged states to cut sales tax or VAT on petrol and diesel by 5 percent to provide relief to consumers a day after it cut excise duty by Rs 2 per litre, sacrificing Rs 26,000 crore in revenue.
Petroleum Minister Dharmendra Pradhan said Finance Minister Arun Jaitley will soon write to all state chief ministers urging them to cut VAT on petrol and diesel.
We have proactively cut excise duty by Rs 2 per litre, sacrificing Rs 26,000 crore in revenue. Now it’s the turn of states to reduce VAT, said Dharmendra Pradhan.
Unlike the Centre, states levy VAT as an ad valorem duty which rises every time there is an increase in price.
“States are the biggest beneficiary and get all of the VAT collection plus 42 percent of the central excise collections,” Pradhan said.
The amount remaining with the Centre is used to finance centrally sponsored schemes in states, he added.
States impose VAT ranging from 26 percent to 38 percent. I urge all states to reduce VAT by 5 percent in line with the cut in central excise duty to provide farmers and consumers with one more slab of relief, the union minister urged.