States pitch in tax cuts after fuel price hike in India
June, 06th 2008
West Bengal, ruled by the central governments communist allies, has cut sales tax on auto fuels by about 5 percent, in an effort to reduce the impact of Wednesday's fuel price increase.
West Bengal said it will incur a 5-billion-rupee loss by cutting sales tax on petrol to 20 percent from 25 percent earlier, and sales tax on diesel to 12.5 percent from 17 percent.
The benefit to consumers will range between 1.4 rupees to 2.1 rupees a litre, the government said in a statement.
Opposition-ruled Bihar has also cut sales tax on diesel by 1.64 percentage points to 18.36 percent and on petrol by 2.5 percentage points to 24.5 percent, nearly negating the fuel price hike.
Another communist-ruled state, Kerala, has also agreed in-principle to cut sales tax, but is expected to announce the change next week, a government official said.
Congress party president Sonia Gandhi has asked chief ministers in party-ruled states to also cut sales tax on petroleum products, The Economic Times newspaper reported.
The Maharashtra government, led by the Congress party, has already indicated a likely cut, papers said.
India raised petrol and diesel prices by about 10 percent on Wednesday, its biggest increase in 12 years, as pressure of near-record high crude prices forced the government to cut back the mounting subsidy bill.
The move, which has already stirred political protests, is expected to drive inflation to a 13-year high of over 9 percent, analysts said.
Nearly half of retail auto fuel prices in India comprise of duties and taxes, with sales tax, which varies in different states, ranging from 10 percent to 30 percent.