States can reduce VAT on petrol diesel:Telangana levies highest tax; Centre reduced excise duty by up to ₹10 per litre

The central government is preparing to make petrol and diesel cheaper in collaboration with the states. The central government may soon appeal to states to reduce Value Added Tax (VAT) on petrol and diesel. According to media reports, there is full possibility of VAT reduction in 22 BJP-ruled states. Controlling diesel prices is a priority, as it directly impacts transportation, agriculture and the industrial sector. Crude oil prices are rising due to increasing tensions between America-Israel and Iran again. On Friday, Brent Crude rose by about 1.9% to reach $104.52 per barrel. In this situation, to provide relief to people from rising inflation, the central government had reduced excise duty on petrol-diesel last month itself. However, after this, petrol-diesel prices were increased by 3.90 rupees. Group of Secretaries Discussed Impact of Iran War A meeting of an empowered group of secretaries was recently held regarding the impact on crude oil supply and prices due to the Iran war. In this meeting, it was discussed that a reduction in VAT is necessary to reduce the burden of expensive crude oil. The central government had reduced the excise duty on diesel by ₹10 per liter to zero just last month, while a ₹3 cut was made on petrol. Now the center wants states to also reduce taxes from their side. Focus on diesel, because it directly impacts inflation According to officials, BJP-ruled states may first consider reducing taxes on diesel. India consumes about 9.47 crore tons of diesel every year, which is much more than any other petroleum product. Petrol is mostly used for private vehicles, but diesel is used in transport, agriculture and industry. If diesel becomes cheaper, then freight transportation will become cheaper, which will bring down the prices of everyday items. In April, the wholesale inflation rate had reached an 42-month high of 8.3%. Preparing to repeat the 2022 formula again If BJP-ruled states reduce VAT, it will be like the situation in 2022. At that time, crude oil prices had reached record levels due to the Russia-Ukraine war. Even then, the Centre had reduced excise duty and asked states to lower VAT.
Currently, BJP and its allied parties are in power in 22 states and union territories of the country. VAT rates in different states in India range from 1 to 27%. A reduction in this could make a significant difference in oil prices.
Experts say – It is necessary to protect people’s standard of living Member of the Prime Minister’s Economic Advisory Council and BJP leader Gaurav Vallabh said, “Since the Iran war started, crude oil prices have increased by more than 50%, but in India, petrol-diesel prices have increased by only around 4%. The Centre has reduced excise duty by ₹10, now it’s the states’ turn. We need to work together to ensure that there is no adverse impact on the living standards of common citizens. States should take this step without significantly affecting their treasuries.” States’ Revenue and Oil Companies’ Losses Opposition’s Counterattack: ‘Ground Being Prepared to Increase Prices’ On the other hand, Congress spokesperson Ranjit Ranjan has targeted the government. He said that asking states to reduce VAT is an indication that the government is preparing the ground for another major increase in petrol-diesel prices. He alleged that when crude oil was cheap in the international market, the Centre increased excise duty to fill its coffers and did not pass on the benefit to the public. ​