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As fuel prices cross Rs 100, focus shifts to states for VAT reduction

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As politics around four revisions of petrol and diesel prices since May 15 heats up, an analysis of current pricing landscape reveals that most of the major states are now selling petrol above Rs 100 a litre mark.Diesel has breached Rs 100 a litre in six states of Telangana, Kerala, Karnataka, Tamil Nadu (led by non-BJP, non-NDA parties), Odisha and Chhattisgarh (led by the BJP-NDA bloc).Ministry of Petroleum and Natural Gas data show that after the fourth revision of prices yesterday, petrol is selling above Rs 100 in 16 major states and within this segment, Telangana (Congress ruled) has the highest retail price of petrol at Rs 118.3 a litre and BJP-ruled Gujarat has the lowest at Rs 101.7 a litre.Five states have retail petrol costs above Rs 110 a litre. Of these, three (Telangana, Kerala and Karnataka) are led by Congress and allies and two (Bihar and Madhya Pradesh) by BJP and NDA.In Telangana and Kerala (both impose among the highest VAT rates in the country with Kerala adding a social security cess on top of its base VAT), petrol is selling above Rs 112 a litre, as per ministry statistics.A Tribune review of fuel pricing trends further reveals that diesel price differential across states is even sharper. Diesel price has gone above Rs 100 a litre in six states. Of these, four are ruled by Opposition parties (Telangana, Kerala, Karnataka and Tamil Nadu) and two by the BJP (Odisha and Chhattisgarh).Enquiries reveal that one reason for comparatively lower diesel prices in BJP-ruled states is diesel VAT consistently below petrol VAT.Official sources say reducing VAT at state level is one way of passing some relief to the people.In the case of the Rs 10-per-litre cut in central excise duty on petrol and diesel announced on March 27, BJP-ruled states had passed on the reduction to the petrol station, while many Opposition-ruled states had not separately reduced VAT.“Central excise component of petrol and diesel price is the same in every state of the Union. Pump prices vary due to value added tax which each state government separately levies. States with the highest VAT impose effective rates of 30 per cent and more, layered with per-litre additions and infrastructure cesses. Those with the lowest impose rates closer to 20 per cent, no per-litre addition and no further cess,” a ministry source explained.Officials further defended four rounds of latest price hikes in fuel.“Through four years that included the Russia-Ukraine war and the closure of the Strait of Hormuz, India cut central excise on petrol and diesel four times, absorbed nearly Rs 30,000 crore of revenue loss and redeemed over Rs 1.3 lakh crore of UPA-era oil bonds in principal alone,” said official sources.They said India was the only major global economy to have held retail fuel prices unchanged through the first 78 days of Hormuz disruption. “A cumulative OMC revision of over Rs 7 a litre across May 15, 19, 23 and 25 is the smallest material upward movement of any major economy outside the directly subsidising Gulf producers,” an official said.

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