States in no hurry to cut VAT
Financial Express Mumbai|May 23, 2022
Cut rates last Nov, say BJP-ruled states; excise cut translates to VAT cut too, counter Opposition states
PRASANTA SAHU
States in no hurry to cut VAT

EVEN THOUGH THE Centre cut excise duty on petrol and diesel for the second time in seven months, Oppositionruled states seem to be in no hurry to oblige with value-added tax (VAT) cuts to give further relief to consumers.

The BJP-ruled states, which had reduced their taxes following last November's tax cuts by the Centre, are seeking a reduction in VAT by states where the governments are led by Opposition parties. These Opposition-ruled states had not cut tax rates then.

On their part, the states ruled by the Opposition are saying that since the Centre's excise cut has led to an automatic reduction in their taxes since their ad valorem taxes are levied on a base inclusive of central taxes, they have already effectively reduced their taxes. A further cut in the tax rates would hit revenues hard, they point out.

Any rate cut by the states will lead to a further reduction in the tax incidence. So, Kerala will lose 2.41/litre on petrol and 1.36/litre on diesel while Rajasthan will lose 2.48/litre on petrol and ₹1.16/litre on diesel due to Saturday's excise cut. As VAT rates vary from state to state, the impact of the central excise duty cut on VAT will also vary.

This story is from the May 23, 2022 edition of Financial Express Mumbai.

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This story is from the May 23, 2022 edition of Financial Express Mumbai.

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