Bowing to pressure from citizens and political parties for relief on the recent fuel price hike, the state government has decided to reduce value-added tax (VAT) on both diesel and kerosene by 2%. This means an average drop of 76 paise a litre on diesel and 28 paise a litre on kerosene. The decision, said chief minister Prithviraj Chavan, will put a financial burden of almost Rs 438 crore on the state.
Asked why the hike of Rs 50 on gas cylinders was not being looked at seriously, chief minister Prithviraj Chavan said there was no VAT on cylinders in Maharashtra anyway. “We have done all we can considering the present financial condition of the state,” he said.
VAT on diesel in Mumbai, Thane and Navi Mumbai will go down from 26% to 24% and from 23% to 21% in the rest of Maharashtra. On kerosene, VAT will be reduced from 5% to 2%.
The decision to give tax exemptions on excise and customs to oil companies in the public sector has put a Rs 49,000-crore burden on the central government, of which at least Rs 820 crore has been passed on to the state, Chavan said. Right now the state collects Rs 8,894 crore in taxes on petrol and diesel annually.
“Considering all this we might face a revenue deficit,” Chavan said.
Senior cabinet ministers at the meeting insisted that the state also look at reducing cylinder costs as it directly affects household expenses.