Home India Gehlot asks Centre to cut excise duty for states to reduce VAT on petrol, diesel

Gehlot asks Centre to cut excise duty for states to reduce VAT on petrol, diesel

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Rajasthan chief minister Ashok Gehlot on Wednesday said Prime Minister Narendra Modi perhaps by mistake referred to Jaipur among the places with higher fuel prices and pointed out petrol and diesel are costlier in Bhopal in Bharatiya Janata Party (BJP) ruled Madhya Pradesh.

The comments came hours after Modi asked states, including Rajasthan, to reduce Value Added Tax (VAT) on fuels at a meeting with chief ministers.

Gehlot said the BJP-led government at the Centre has earned about 26 lakh crore from excise duty on fuels in eight years. He said this is the highest any government has earned in the country’s history by taxing petrol and diesel.

Modi said the Centre cut the excise duty but many states did not reduce VAT to provide relief to people.

Gehlot maintained Rajasthan reduced VAT by 2% on petrol and diesel in January 2021 even as the Centre did not reduce the excise duty. He added the Centre imposed a new cess of 4 on diesel and 2.5 per litre on petrol in the name of agriculture infrastructure and development two days after the state budget (2021-22). Gehlot said due to this, people in Rajasthan could not benefit from the VAT reduction.

In November, the Centre reduced the excise duty on petrol by 5 and diesel by 10 per litre. The duty on petrol was increased by 10 and diesel by 13 per litre in May 2020. Gehlot said this means excise duty increase was not even reduced completely.

Gehlot said states levy VAT on the Centre’s excise duty. He added by reducing the excise duty, the VAT is automatically reduced. For this reason, due to the reduction in excise duty in November, Rajasthan automatically reduced VAT by 1.80 per litre on petrol and 2.60 per litre on diesel.

“To give relief to the common person, the state government on November 17, 2021, reduced VAT on petrol by 4.96% and on diesel by 6.70%. Due to the reduction made thrice by the state, there was a revenue loss of about 6300 crore per year,” said Gehlot. He added Modi only mentioned the revenue loss of 6000 crores of BJP-ruled Karnataka and 3500-4000 crores of Gujarat. “These two states would probably have been mentioned in view of the upcoming assembly elections there.”

Gehlot said Modi talked about VAT but not about the Centre’s excise duty. “In May 2014, when Modi became the Prime Minister, excise duty was 9.20 per litre on petrol and 3.46 per litre on diesel, but today excise duty is 27.90 per litre on petrol and 21.80 per litre on diesel.”

Gehlot said during the previous Congress-led government, the states used to get their share of excise duty. “But now the share of the states has been continuously reduced to just a few paise per litre, so the states are forced to increase their VAT.”

State BJP chief Satish Poonia said the Centre has reduced excise duty on petrol and diesel but the Gehlot government was not reducing VAT and that is why people are not getting relief. He added the BJP-ruled states such as Karnataka, Gujarat, Uttar Pradesh, and Haryana have reduced VAT for relief to the common person.

“Due to the high VAT, smuggling of petroleum products is at its peak in the state…[This has] led to the closure of 1,500 petrol pumps in about 17 border districts of the state.”

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