Fuel price: Onus now on States to cut VAT

Our Bureau New Delhi | Updated on January 08, 2018 Published on October 04, 2017

Heavy levy The VAT component, a State levy, is as high as 48 percent for petrol in Maharashtra (Mumbai)

May be discussed on sidelines of GST Council meeting

The scope of a further reduction in fuel prices is likely with the pressure now on States to lower the Value Added Tax on petrol and diesel, after the Centre cut excise duty on these products on Tuesday.

The issue is also likely to be taken up at the GST Council meeting on October 6.

Petroleum and Natural Gas Minister Dharmendra Pradhan has asked State governments to follow the Centre and lower VAT levied. “I urge State governments to reduce VAT on petrol and diesel by 5 per cent to give more relief to consumers,” he had said.

Pradhan said that the price of petrol had been cut by ₹2.50 per litre and diesel by ₹2.35 in Delhi after reduction of excise duty. The States are the ultimate beneficiary of tax imposed on the fuels and they should reduce the VAT, he added.

The Finance Ministry had on Tuesday lowered the basic excise duty on petrol and diesel by ₹2 each. This has resulted in petrol being cheaper by ₹2.5 per litre and diesel by ₹2.25.

“A ₹2 cut is not sufficient, but had to be done given the fiscal space. We expect States too to match the price cut by lowering their taxes,” said a senior government official.

Pointing out that it is not only the Centre that had levied additional taxes on fuel, Finance Minister Arun Jaitley had earlier prodded States also to lower VAT on diesel and petrol.

According to a recent report by CARE Ratings, the VAT component levied by States is as high as 48 per cent for petrol in Maharashtra (Mumbai). In case of diesel it is as high as 38 per cent in Madhya Pradesh.

After the revision, excise duty on petrol is now ₹19.48 per litre (from ₹21.48 per litre) and on diesel ₹15.33 a litre (from ₹17.33 earlier).

GST Council

Meanwhile, the GST Council in its meeting is also expected to finalise a package for exporters who have been facing difficulties in refunds of Integrated GST.

A committee headed by Revenue Secretary Hasmukh Adhia is understood to have reviewed the issue.

The Council now is looking at two options—either an exemption on imported inputs that do not attract customs duty or a mechanism for faster refunds based on the details of the consignment.

It is also expected to review the IT system for the GST Network and earlier complaints of glitches and tax collection data for July and August.

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Published on October 04, 2017
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