Maharashtra: Fuel VAT cut sure to singe new government's revenue

The Maharashtra government charges VAT at the rate of 25% - Rs 19.43/ litre on petrol and at the rate of 21% - Rs 15.54/ litre on diesel. There is an additional government cess of Rs 10.12 per litre on both petrol and diesel

Sanjay JogUpdated: Wednesday, July 06, 2022, 10:06 AM IST
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Mumbai: The new Eknath Shinde-Devendra Fadnavis government in Maharashtra will have to take a hit of Rs 1,490 crore annually if the government decides to reduce VAT on petrol and diesel by Re 1 per litre, Rs 2,980 crore with a reduction of Rs 2/ litre, Rs 4,470 crore with a reduction of Rs 3/ litre, Rs 5,960 crore with a cut of Rs 4/litre and Rs 8,940 crore for a Rs 5/ litre reduction.

The state sales/VAT department has made internal calculations to present before the cabinet for its approval. According to the department, in Maharashtra, 38 lakh kilolitres of petrol and 108 lakh kilolitres of diesel are sold annually.

These calculations have been made in the wake of Chief Minister Eknath Shinde’s announcement in the state assembly after winning the trust vote on Monday.

The Maharashtra government charges VAT at the rate of 25% - Rs 19.43/ litre on petrol and at the rate of 21% - Rs 15.54/ litre on diesel. There is an additional government cess of Rs 10.12 per litre on both petrol and diesel.

In the annual budget presented by the former minister Ajit Pawar in the budget session in March, the previous Maha Vikas Aghadi government had estimated Rs 50,200 crore in sales tax/ VAT collection on petrol, diesel, ATF and ethanol for 2022-23, as against Rs 45,000 crore in 2021-22.

On May 22 this year, the MVA government had reduced VAT by Rs 2.08 and Rs 1.44 per litre on petrol and diesel respectively, saying it had done all that it could possibly do.

A senior sales tax/ VAT department official told The Free Press Journal, “The chief minister has made an announcement on Monday but the cabinet will decide on the actual reduction in VAT. As far as reduction in additional cess is concerned, the government can do it by issuing an executive order. If the cabinet gives its nod for a Re 1 reduction in VAT, it will be reduced to Rs 18.43 per litre on petrol and Rs 14.54 per litre on diesel. Of the annual loss of VAT of Rs 1,490 crore following a Re 1 reduction, Rs 480 crore will be on petrol and Rs 1,010 crore.’’

The Federation of the All Maharashtra Petrol Dealers’ Association’s chief, Uday Lodh, said the government needs to match the VAT rates after the proposed reduction with the border states.

“Besides, the government will have to tell in advance the effective date of implementation of VAT cuts on petrol and diesel to minimise the losses. There are 6,500 retail outlets across Maharashtra,” he added.

The official said Maharashtra’s excise collection on diesel was Rs 33,479 crore in 2017-18, Rs 35,282 crore in 2018-19, Rs 37,349 crore in 2019-20 and Rs 30,432 crore in 2020-21.

“However, in return, the state received Rs 427 crore in 2017-18 from the Centre, Rs 440 crore in 2018-19, Rs 435 crore in 2019-20 and Rs 383 crore in 2020-21.”

Similarly, out of Maharashtra’s excise collection on petrol of Rs 14,920 crore in 2017-18, the state received Rs 129 crore, Rs 139 crore of Rs 15,643 crore in 2018-19, Rs 147 crore of Rs 16,134 crore in 2019-20 and Rs 138 crore of Rs 14,032 crore in 2020-21.

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