On Wednesday, Uttarakhand too announced slashing VAT by 2% on auto fuel where petrol is taxed at 33.25% and diesel at 19.93%.
Gujarat, which used to charge uniform 28.96% Value-Added Tax on both petrol and diesel, slashed the rates by 4% and it may lose ₹2,316 crore a year in revenue.
In a major relief for motorists and consumers, the state government on Tuesday made a decision to reduce the prices of petrol and diesel by Rs 2 and 1 per litre.
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. For diesel, the Value-Added Tax is 24% plus a Rs 2 surcharge per litre in these seven cities, and 21% plus Rs 2 per litre surcharge in other areas."The surcharge on petrol has been reduced to Rs 9 per litre while that on diesel will be brought down to Rs 1", explained an official from the state finance department. Gajkumar Mangave, district head of petrol pump operators, said, "Reduction in prices is of little help for the customers". "The daily change in prices of petrol and diesel affect the customers from across the country to a similar extent". The VAT component varies across cities and the percentage is decided by individual state governments.
Maharashtra had mopped up the highest revenue, whose receipts from petroleum products increased from ₹19,795 crore in 2014-15 to ₹23,160 crore in 2016-17.
Data of Indian Oil showed that on Wednesday - if compared with previous day, petrol prices were higher by 3 paisa in New Delhi at Rs 68.48 per litre, Kolkata at Rs 71.26 per litre and Chennai at Rs 70.96 per litre.
A mere Rs 2 reduction in excise duty recently amounts to around Rs 26,000 crore reduced collections annually (around 10 percent of total collections from fuels). The pump operators have demanded to bring the petrol and diesel into the ambit of goods and services tax (GST) so that the pricing difference among the states will no longer remain. Petrol and diesel, on the other hand, are basic needs for retail and commercial consumers.