Reduction Of VAT To 5% Can Ease Fuel Prices By ₹15 Per Litre: Industry Body

The Chamber of Trade and Industry (CTI) on Monday said that the Centre should direct all state governments to impose a flat value-added tax (VAT) of 5 percent on petrol and diesel.

According to NDTV Profit, the industry body has written to Union Oil and Gas Minister Hardeep Singh Puri, seeking the imposition of a fixed VAT of 5 percent by all state governments for the next three months to provide relief to consumers from rising prices.

The CTI urged the minister to call an emergency meeting of all state finance ministers to implement the decision.

The industry body said that if all state governments agree to reduce VAT to 5 percent, petrol and diesel prices may become cheaper by Rs 10-15 per litre.

The CTI argued that out of the 28 states in the country, 21 states have Bharatiya Janata Party governments. Hence, it will be feasible to convince state governments to let go of petrol and diesel revenues for three months.

The industry body said a reduction in VAT could shield consumers from price shocks if further hikes are planned.

VAT is imposed by state governments. While some states impose a VAT of 20 percent, it goes beyond 30 percent in certain states.

In states like Telangana and Haryana, petrol costs over Rs 115 per litre and Rs 110 per litre due to high state-imposed taxes.

VAT imposed on fuel sales contributes a significant share to state finances. The Centre has recently reduced excise duty on petrol and diesel to reduce the impact of rising crude oil prices.

Crude oil prices have jumped from around $65 per barrel to $100 per barrel due to the West Asia conflict.

Indian oil marketing companies have raised petrol and diesel prices four times in the last 11 days to offset some losses caused by the sharp rise in crude oil prices.