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State FMs likely to slash fuel sales tax
June, 16th 2008

Consumers may expect some more relief from high fuel prices soon. The empowered group of state finance ministers is likely to discuss a proposal of the Centre to reduce sales tax on petrol, diesel, cooking gas (LPG) and jet fuel on Monday. States may consider shielding consumers from the recent fuel price hike in the light of rising inflation. It is suggested that states should set a maximum sales tax limit on fuels that could be between 15-20%, a highly-placed source said.

Certain states have been quick to announce a relief package to save the common man from the impact of fuel price hike. The package ranged from reduction in sales tax to a direct subsidy on certain products. West Bengal, Kerala, Tamil Nadu, Maharashtra, Haryana, Bihar, Gujarat, Andhra Pradesh, Delhi, Orissa, Uttarakhand, Goa are among the states that have either already cut sales tax or announced subsidy on some products.

Left-ruled West Bengal has slashed sales tax from 25% to 20% on petrol and from 17% to 12.5% on diesel. Effectively, this makes petrol and diesel cheaper by Rs 2.09 and Rs 1.36 per litre, respectively. Kerala reduced sales tax on petrol by 2.98% and diesel by 2.20%. Tamil Nadu has also announced a 2% sales tax cut on diesel, but did not give any relief on petrol and LPG.

Congress-ruled Maharashtra has slashed sales tax on both petrol and diesel by 2%. The cut is expected to make petrol and diesel cheaper by less than a Re 1 per litre from the post-hike rate of Rs 55.88 and Rs 39.54, respectively. Even LPG cylinders have become cheaper by Rs 14 after a 4% cut in VAT.

Haryana has waived 4% VAT on LPG, losing Rs 45 crore in revenue. VAT on diesel has been reduced from 12% to 8.8%. This will bring down the diesel rate from Rs 34.66 per litre to Rs 33.66. In Bihar, both petrol and diesel will cost one rupee less after a duty cut of 2.5% on petrol and 1.64% on diesel.

BJP-ruled Gujarat also announced a 3% cut in VAT rates on petrol and diesel, while removing the tax on LPG. Congress-ruled Andhra Pradesh and Delhi only provided relief on cooking gas. While Andhra Pradesh would supply cooking gas to all consumers at the old rate, Delhi cut sales tax and announced subsidy on LPG.

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