Centre may tell states to cut VAT on petrol, diesel

With petrol and diesel prices ruling high, the government is likely to cut excise duty up to Rs 1.50 a litre but the  Finance Ministry may also ask the states to reduce VAT or local taxes once again.

Petroleum Minister Dharmendra Pradhan held a meeting with state-owned oil marketing companies on the price situation. Petrol prices touched Rs 74.50 a litre and diesel Rs 65.75 a litre in the national capital on Monday. Sources said the government may have asked the oil marketing companies not to pass the burden onto consumers if petrol prices hit the psychological mark of Rs 75 per litre and diesel inches towards Rs 66 per litre.

“The excise duty reduction is the last resort. Before that the states will be asked to bring down VAT. In any case, the government is closely watching the international movement in crude prices and the consumer will not be allowed to suffer,” an official said.

Excise duty cut?

Another official said on the condition of anonymity that the government will act on excise duty front by the end of this month or early next month if the global crude oil prices do not come down.

The government raised excise duty on the two fuels nine times since it assumed power in 2014 but cut it only twice. In February, the government had reduced the additional excise duty on the fuels by Rs 6 but the effect was negated after a new road cess of Rs 8 a litre was introduced in the Union Budget.

Excise duty is levied at Rs 19.48 a litre on petrol and Rs 15.33 a litre on diesel. State sales tax or VAT vary from state to state. In Delhi, VAT on petrol is Rs 15.84 and on diesel Rs 9.68 a litre.