Free Press Journal

Rising petrol, diesel prices fuel demand for VAT slash

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BHOPAL : With the hike in rates of petrol and diesel for the second time within less than a month, the demand for reduction in VAT on petroleum products in Madhya Pradesh is growing louder At present, the state government levies 31 per cent VAT on petrol and 27 per cent on diesel and these are highest in the country.

Revenue from VAT on diesel and petrol sales constitutes a major chunk of the earnings of commercial taxes department. Taxes on petroleum items are levied as per ‘ad valorem’ method, which means that any increase or decrease in prices of fuel affects tax collection.

Congressmen torched the effigy of Prime Minister Narendra Modi on Saturday in protest against hike in rates of petrol and diesel. They said that because of higher VAT, the fuel prices in Madhya Pradesh are the highest.


On April 15, the rate of petrol in the city was Rs 65.33 per liter and it was increased to Rs 69.68 per liter on May 1 and on May 16, it was again raised to Rs 73.13 per liter. Similarly, diesel was selling for Rs 54.06 per liter on April 15. It was hiked to Rs 56.74 on May 1 and to Rs 59.83 on May 16. In this way. Thus, petrol has become costlier by Rs 8 per liter and diesel Rs 6 per liter within less than a month.

VAT rate varies from state to state. For instance, VAT on Petrol in Rajasthan is 30 per cent, in Haryana it is 21 per cent, UP (26.8 per cent), Delhi (20 per cent) and Goa (10 per cent). VAT on diesel in Rajasthan is 22 per cent, Haryana is 12.07 per cent, Punjab is 11.25 percent, UP is 17.48 per cent, Delhi is 12.5 per cent.

Petrol pump dealers Association president Ajay Singh said, “Now the state government should reduce VAT on Petrol and diesel as petrol and diesel prices have been raised twice within the last one month. We will call on the Finance and Commercial Taxes minister Jayant Malliaya soon and request him to reduce VAT. Previously also we raised this issue many times but the government always turned down the demand stating it would reduce the government earnings. But now that fuel prices have gone up, the government should consider reducing VAT.”

Higher VAT on diesel and petrol translates into losses for state’s petrol dealers. The rate of VAT in neighbouring states, including UP, Gujarat and Maharashtra, is already lower than that in Madhya Pradesh and the petrol pumps in MP are losing business to these states, Singh added.