Gujarat government on Tuesday cut down value added tax (VAT) on fuel by 4 percent in a move that will significantly reduce the price of both petrol and diesel. Following this, price of petrol has gone down by Rs 2.93 per litre and diesel by Rs 2.7 per litre. “We are cutting down VAT on fuel by 4%; price of petrol to come down by Rs 2.93, diesel by Rs 2.72,” Gujarat CM Vijay Rupani said while making the announcement.

Earlier, oil minister Dharmendra Pradhan had said states must reduce VAT to bring the prices down as excise duty had been proactively cut. “We have proactively cut excise duty. Now it is the turn of states to reduce VAT,” Oil Minister Dharmendra Pradhan had remarked. “States are the biggest beneficiary. They get all of the VAT collection plus they also get 42 per cent of the central excise collections. The amount remaining with the Centre is used to finance centrally sponsored schemes in states,” Pradhan had added.

Centre had reduced the excise duty on petrol to Rs 19.48 per litre from Rs 21.48 per litre and on diesel to Rs 15.33 a litre from Rs 17.33. As a result of which petrol prices were cut by Rs 2.5 per litre and diesel by Rs 2.25.

Bihar CM Nitish Kumar had however refused to reduce the prices and asked the centre to deduct the prices of petroleum products instead. “The base prices in Bihar are higher than those in neighbouring Jharkhand. Once it is recalculated and reduced, the VAT will automatically fall and people will be benefited,” Bihar CM Nitish Kumar had said. Kerala govt also had refused to slash value added tax on fuel. It must be noted that Gujarat is the first state in India to give relief to consumers from the recent global fuel price rise. It would be interesting to see if other states follow suit.