Rajasthan reduces 2% VAT on fuel after premium petrol price crossed ₹100-mark

Rajasthan CM Ashok Gehlot has also urged the Central government to reduce taxes on petrol an diesel.

The Congress government in Rajasthan, led by chief minister Ashok Gehlot, has decided to reduce the rate of value added tax (VAT) on petrol and diesel by 2% after the price of premium petrol crossed ₹100/litre-mark on Wednesday. The reduction in VAT will be effective from January 28, according to the state finance department.

Rajasthan chief minister Ashok Gehlot’s comment comes amid ongoing protests being carried out by farmers in and around the borders of Delhi against the three farm laws that were implemented by the Centre in September. (PTI photo)

A release from the CM’s office, issued late Thursday night, states that despite the negative impact on economic activity due to the pandemic and the subsequent decrease in revenue, the decision to reduce VAT has been taken in the interest of the common man. The reduction in VAT on petrol and diesel will provide relief to commuters as well as to transport, infrastructure, real estate, and other businesses.

“With the reduction in VAT rates, the government’s revenue will reduce by approximately ₹1000 crore annually,” said the statement.

Gehlot claimed that despite the international crude oil prices staying at the lowest level for some time, inflation was rising in the country due to petrol and diesel prices being at the highest level, causing economic hardship to the common man.

He said that the Central government was currently charging an excise duty of ₹32.98 per litre on petrol and ₹31.83 per litre on diesel, which he said was “excessive”.

He added that the basic excise duty forms a part of the divisible pool of the Centre's tax revenue, from which, 42% of resources are shared with the states, which has been reduced continuously from ₹9.48 to ₹2.98 for per litre of petrol and ₹11.33 to ₹4.83 for per litre of diesel – causing a huge loss of revenue to all the states including Rajasthan.

The CM said that the Centre has been continuously increasing the additional excise duty from ₹8 to ₹18 per litre on petrol and diesel; and special excise duty hike from ₹7 to ₹12 on petrol and up to ₹9 per litre on diesel has been done.

He continued that due to this Central policy, the states are not benefitting while the common people have to bear the brunt of expensive petrol and diesel.

He demanded that following his government’s reduction in VAT, the Central government should also offer relief by reducing Central taxes on petrol and diesel.

With a hike of 26 and 38 paise per litre on Tuesday and Wednesday respectively, the price of petrol in Sri Ganganagar of Rajasthan had reached ₹98.31 per litre for normal petrol and ₹101.80 per litre for premium petrol.

In the capital Jaipur, petrol price had reached ₹93.86 per litre and diesel price reached ₹85.94 per litre.