Delhi govt cuts VAT rates, diesel to be cheaper by over ₹8/litre in capital

The new diesel rate will come into effect only after the Delhi government’s issues a gazette notification, which was yet to come till the time of going to the press.

Delhi chief minister Arvind Kejriwal on Thursday reduced the value-added tax (VAT) on diesel from 30% to 16.75%, effectively slashing the fuel price by ₹8.36 per litre in the national capital. Currently, the price of diesel is ₹81.94 per litre in Delhi, much higher when compared to petrol, which is ₹80.43 per litre.

A petrol pump employee wearing a face shield while attending to a customer in Wazirpur, New Delhi. (HT photo)

The new diesel rate will come into effect only after the Delhi government’s issues a gazette notification, which was yet to come till the time of going to the press.

Together, we have to revive the economy after the coronavirus disease (Covid-19) pandemic. Currently, diesel is quite expensive in Delhi. It costs around ₹82 per litre. The Delhi cabinet on Thursday has decided to reduce the VAT on diesel from 30% to 16.75%. This will reduce the diesel rate by ₹8.36 per litre. The move is likely to help revive Delhi’s economy,” the CM said during a video press briefing.

On May 4, the Delhi government had increased the VAT on both petrol and diesel to 30% from the earlier 27% on petrol and 16.75% on diesel. So, in essence, Thursday’s announcement amounts to a roll-back of the hiked VAT.

The reduction is aimed at increasing Delhi’s revenue, which had dipped by 90% in April because of the nationwide lockdown restrictions, which were enforced from March 25, to prevent the spread of Covid-19. Senior government officials said for the first quarter of the financial year (April to June), Delhi earned around ₹2,520 crore as opposed to ₹7,252 crore revenue during the corresponding period the previous year.

“In July, with further relaxation of lockdown norms and revival of economic activities, the state’s revenue increased to some extent and, hence, the decision to reduce VAT on diesel was taken,” said a senior official in the government’s finance department who did not wish to be identified.

“This is one of several measures to revive Delhi’s economy. Earlier this week, we had launched a portal to connect jobseekers with potential employers and the response we have received to that is overwhelming,” Kejriwal said.

The chief minister said over 200,000 job vacancies have been posted on the portal and that 7,577 employers and 322,865 jobseekers have registered until Thursday morning.

KS Atwal, president of the All India Motor Transport Congress, welcomed the move and said it was a “big relief” for the transport industry.

“The transport industry is under immense pressure ever since the lockdown was imposed. The additional VAT added to the stress. Hence, the roll-back of the hiked VAT has come as a big relief. With competitive prices, a large number of truckers who were getting their vehicles refuelled in neighbouring states such as Haryana and Uttar Pradesh will again start buying diesel from Delhi. Also, the increase in transportation costs would have eventually caused a sharp increase in the price of essentials such as fruits and vegetables, which will not happen now. Other states should follow the Delhi government’s example.”

As on Thursday, diesel price in Uttar Pradesh (varies from district to district) was between ₹73.40 and ₹75.19 per litre, while the price in Haryana was between ₹73.54 and ₹74.98 per litre.

Soon after Kejriwal’s announcement, Aam Aadmi Party’s (AAP) national spokesperson Raghav Chadha criticised the Bharatiya Janata Party (BJP)-led Union government for increasing the excise duty on diesel.

Chadha said, “The AAP government’s decision will do miracles in reviving Delhi’s economy. On the other hand, the BJP-led central government has adopted an extortionist approach, under which they have increased the excise duty on diesel and petrol at least 22 times over a period of 22 days between June 7 and June 29. They should take a leaf out of CM Kejriwal’s book and roll-back the hike.”

Hindustan Times had earlier reported that between April 1 and July 1, the share of central and state taxes in petrol and diesel prices in Delhi increased from 45% to 63% for diesel and 54% to 64% for petrol. Central taxes per litre are almost twice state taxes.

The Delhi BJP chief Adesh Gupta hit back saying it was the BJP which pressured the AAP government into rolling back the increased VAT on diesel.

Gupta said, “Chief minister Arvind Kejriwal should open his eyes and see how diesel rates in neighbouring states ruled by the BJP are already low. The AAP government unnecessarily increased diesel rates in the first place by increasing the VAT. We have pressured them into rolling back the additional tax element. Their claim against the BJP with regard to diesel rates is baseless.”

Petrol and diesel prices are determined broadly by crude oil rates, and vary in different parts of the country based on VAT charged by each state.