Fuel VAT to stay: Gujarat FM

Amid reports of impending sharp hikes in prices of petrol and diesel, state finance minister Vaju Vala on Friday claimed that there was no scope for a reduction in VAT rates on fuels.

Vala, who presented the state budget for a record 18th time
recently, was responding to an informal query by reporters about whether the government could cut VAT on the two fuels to provide
relief to the common man.

"The state's revenues have increased sharply and the economy is going strong, but there is no possibility of reducing VAT on petrol and diesel. And anyway, the tax rates are fixed as per the structure prescribed by the Centre," Vala told reporters in Ahmedabad.

The No. 2 in the Narendra Modi Cabinet conceded that the state government's VAT revenues go up with every price hike, but ruled out any reduction in tax rates. He justified the government's stand saying that while revenues had increased, the state's spending had also gone up.

"The cost of building roads and other infrastructure has gone up. The government's salary expenditure and other administrative expenses have also shot up. We need funds for all these," he said.

When pointed out that BJP government in Goa had recently reduced VAT on petrol from 22% to a symbolic 0.1%, Vala suggested that Central government be asked to reduce the duty burden on the fuels.

"The state government earns around Rs10 a litre from petrol, but the Centre earns Rs13-14. You should ask them if they are going to sacrifice their earnings by reducing excise duty on fuels, which will make petrol and diesel cheaper," he said.

The state government charges VAT of 23% and 21% on petrol and diesel respectively, which are among the highest in the country. The government also levies Cess of 2% on petrol and 3% on diesel.

Vala, however, pointed out that the state government had already reduced VAT on petrol and diesel by three per cent in 2008.
According to officials, the government earned VAT revenues of a staggering Rs8,250 crore on sale of petrol and diesel from 2009 to 2011. It collected another Rs1,862 crore as Cess.