Maharashtra may cut VAT on petrol, diesel, suffer Rs 2,600 cr revenue loss

After Gujarat, the Maharashtra government may opt for a Rs 2 per litre cut in value-added tax (VAT) on petrol and diesel, adding to the losses of the debt-ridden state.

BJP-ruled Maharashtra levies 46.52 per cent VAT (47.64 per cent in Mumbai) on petrol, the highest in the country. Moreover, a surcharge of Rs 11 per litre and Rs 2 per litre is already collected on petrol and diesel, besides the VAT.

After the implementation of the goods and services tax (GST), several states have increased the value-added tax, leading to a rise in fuel prices.

VAT cut impact on Maharashtra

The move will not only hit Maharashtra’s exchequer but also lead to a revenue loss of Rs 2,600 crore, reported Indian Express.

Farm loans: The cost of waiving farm loans will shoot Maharashtra’s debt stocks to Rs 4.13 lakh crore in FY17, the report added. Therefore, the cut will further aggravate the state’s burden to revive economy.

Gujarat becomes the first state to cut VAT

Gujarat, which currently levies 28.96 per cent VAT on petrol and diesel, became the first state to cut VAT.

Most BJP-ruled are likely to follow Centre’s move, even though Devendra Fadnavis government had earlier rejected Centre's suggestion for the same. Even Madhya Pradesh, which levies 38.79 per cent VAT on the fuel, indicated considering the option. However, non-BJP ruled states like Kerala and Odisha opposed against lowering of taxes.

Govt cuts excise duty on petrol, petrol

For the first time since Narendra Modi came to power in 2014, the NDA government cut excise duty on petrol and diesel by Rs 2 per litre to cushion the impact of rising international crude prices. The Centre took a hit of Rs 26,000 crore in revenue in the cut in excise duty.

Announcing the excise cut, the government said the rise in the prices of petrol and diesel is also reflected in inflation, which has increased to 3.24 per cent for the month of August 2017, as compared to 1.88 per cent for the month of July 2017, and which prompted the government to act swiftly.

Petrol in Delhi now costs Rs 68.38 a litre, down from Rs 70.88. A litre of diesel now comes for Rs 56.89 as against Rs 59.14 previously.

'States are biggest beneficiaries'

Oil Minister Dharmendra Pradhan asked states to follow Centre’s move and cut VAT by 5 per cent. "States are the biggest beneficiaries. They get all of the VAT collection plus 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," reported PTI.

Pradhan said petrol, diesel and natural gas should be included under GST.

"This is not a political issue... keeping in mind the fiscal balance if the union government has revisited the tax structure then states should also do the same," he said. 

Finance Minister Arun Jaitley, too, nudged states to cut VAT on petrol and diesel to provide further relief to consumers from high fuel prices. 

Despite demands from industry, petroleum products, as well as natural gas, do not come under the GST regime. These continue to be taxed as per the old VAT regime.

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