Excise cut done, Centre tells CMs to lower VAT

New Delhi: A day after the Finance Ministry cut the excise duty rate on both branded and unbranded petrol and diesel by Rs 2 per litre, the Centre on Wednesday urged all States to slash sales tax or value added tax (VAT) by 5 per cent. Speaking to mediapersons here on Wednesday, Oil Minister Dharmendra Pradhan was quite categorical: "We have proactively cut the excise duty. Now, it is the turn of the states to reduce VAT."

Noting that "Prime Minister Narendra Modi has taken the risk of losing huge money for the benefit of the people", Pradhan pointed out that "the State governments should now take up their bit of responsibility and cut the VAT on petrol and diesel by at least 5 per cent".

The Centre's excise duty reduction led to the price of petrol falling by Rs 2.50 per litre to to Rs 68.38 in New Delhi on Wednesday from Rs. 70.88 on October 3. The diesel price dropped by Rs 2.25 per litre to Rs 56.89 against Rs 59.14 before the excise cut.

"In the first week of September, Finance Minister Arun Jaitley had written to state chief ministers urging them to cut the VAT on petrol and diesel," added Pradhan. "Because of a cut in excise duty and drop in international prices, today's fuel prices have turned advantageous for consumers," he observed.

The Government has faced flak for raising the excise duty on petrol by Rs 11.77 per litre and that on diesel by Rs 13.47 a litre between November 2014 and January 2016, thus wiping out the potential gains from plummeting international oil prices. To make matters worse, it increased the petrol price by Rs 7.8 a litre since early July to an over three-year high of Rs 70.88 and diesel rates by Rs 5.7 to an all-time high of Rs 59.14.