Rs 2 cut on petrol and diesel VAT likely in Maharashtra!

                      

Maharashtra may see a Rs 2 per litre cut in value added tax (VAT) on petrol and diesel. The Devendra Fadnavisgovernment has decided to accepted to accept the Centre’s suggestion to states to lower the tax, although reluctantly, confirmed sources. The state government had previously rejected the suggestion, contending that the state’s exchequer would not be able to bear the loss.

Facing heat from the Opposition over rising retail fuel prices, the Narendra Modi government on October 4 cut the basic excise duty on petrol and diesel by Rs 2 per litre. It was the first time when the NDA government cut excise duty on petrol and diesel after raising it on 11 occasions since November 2014.

Almost immediately after slashing the excise duty, Oil Minister Dharmendra Pradhan urged state governments to cut VAT on these products by 5 per cent for passing on more relief to consumers. Later, Finance Minister Arun Jaitley wrote to Chief Ministers to take cue from the Centre and slash VAT rates.

While some non-BJP ruled states such as Kerala and Odisha have spoken out against lowering of the taxes, almost all BJP-ruled states are likely to accept the Centre’s suggestion. Gujarat has already announced its plan to lower taxes, while Madhya Pradesh, too, has indicated that it was actively considering the option. Sources confirmed that Maharashtra too has decided to fall in line with the BJP trying to arrest the growing unrest among the middle class over price rise.

But the populist move will severely hit Maharashtra’s exchequer. With the state’s fiscal outlook worsening, a cut of Rs 2 per litre in VAT on petrol and diesel will lead to a revenue loss of Rs 2600 crore, sources said. Maharashtra levies a high 26 per cent VAT on petrol and 24 per cent on diesel in Mumbai, Thane and Navi Mumbai. The same is 25 per cent for the rest of the state. Besides the VAT, a surcharge of Rs 11 per litre and Rs 2 per litre is collected on petrol and diesel, respectively.

Maharashtra Finance Minister Sudhir Mungantiwar said, “We have received a communication from the Centre for lowering VAT on petrol and diesel. I have called a review meeting in this regard Friday.”

With the cost of the farm loan waiver expected to further burden the state’s debt-ridden economy — Maharashtra’s debt stock is expected to soar to Rs 4.13 lakh crore in 2017-18. The state government has already been forced to cut down on its spending plan for 2017-18, which has also impacted the public sector capital investment. The revenue loss due to the lowering of taxes will further aggravate the situation, confirmed sources.

Since the Centre’s missive is tied to a political narrative, a senior minister said that the option of defying it was ruled out. While the state’s bureaucracy has also suggested the option of limiting the revenue loss by lowering the tax by Rs 1 per litre, sources said that the Centre’s message was loud and clear- cut the tax as much as possible. The state’s political leadership is likely to settle for a Rs 2 per litre cut.!!

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