Uttarakhand cuts Value-Added Tax on petrol, diesel by 2 percent

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Under public pressure, the Centre had recently brought down excise duty on petrol and diesel by Rs 2 per litre and urged the state governments to reduce the Value-Added Tax to lower the fuel prices further. Over these last three years global crude prices have halved from around Dollars 110 per barrel to USD 56 per barrel.

While all the other metro cities saw rise in their petrol and diesel prices on October 11, 2017, it was only Mumbai who saw massive decline in its prices compared to previous day.

The Centre last week cut excise duty on petrol and diesel by Rs 2 per litre each to provide relief to consumers from three-month long relentless price hike. While BJP-ruled Gujarat and Maharashtra took the lead in lowering the tax, Congress-ruled Himachal Pradesh followed them.

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Chief Minister Siddaramaiah on Wednesday ruled out slashing sales tax on petrol and diesel. Both sectors have sought uniform pricing across the country under the one nation, one tax concept to facilitate equality, both for operators and State governments.

Despite the advent of the Goods and Services Tax (GST) regime, products such as motor spirits, aviation turbine fuel (ATF) crude, natural gas and liquor continue to attract VAT. We have demanded to include the petrol and diesel in GST so that the prices remain same.

"The decision would put a burden of Rs 2,316 crore a year on the state exchequer". Centre's revenues from petroleum products nearly doubled from ₹1,72,066 crore in 2014-15 to ₹3,34,534 crore in 2016-17, while it would part with 42% of the earnings with the State governments.

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Uttarakhand is the third BJP ruled state to cut Value-Added Tax on fuels following the directions of Central government.

It is unlikely that the government would want to tinker with the recently implemented GST structure and introduce any slab higher than 28 percent. The government is trying to find way out by adopting a new industrial policy.

This, too, has its own set of problems.

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In 2016-17, Maharashtra consumed 426.80 crore litres of petrol and 976.46 crore litres of diesel. Given the huge difference between the maximum GST rates and current taxation rate on petrol and diesel, the government would require a cess of almost 50-75 percent to make up for lost revenue.

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