Maha to reduce VAT on fuel, but plan may affect finances

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After the leadership of the central government, the Maharashtra government has decided to give a gift of Diwali by reducing taxes on fuel.

However, this move will reduce the significant amount of government revenue. Sudhir Mungantiwar, the state’s finance minister, said on Thursday they are very positive about reducing the value added tax (VAT) on fuel. “We have not yet decided what the cut-off percentage would be. This move can tweak the state’s finances,” said Mungantiwar

Currently, the government of Maharashtra charges a 26 percent VAT that amounts to Rs 13 plus Rs 11 as a period of drought per liter of petrol and diesel. “We are planning to reduce the Rs 2 IVA per liter of fuel. In doing this, we are going to lose around Rs 2,000 crore revenue which includes Rs 800 crore and Rs 1,200 crore of petrol and diesel, respectively. We earn annually Rs 7,300 crore revenue of petrol and Rs 10,500 crore in diesel, “the finance department official said on condition of anonymity.

He also said that the current financial situation of the Maharashtra government is not in good shape. “We can not afford to raise the various taxes. The proposed loss of Rs 2,000 crore revenue due to the rise in VAT on fuel will result in reduced development work. Our problem is that, as the diktat has come from the Center we will have to adhere to the reduction of taxes.

Nawab Malik, spokesman for the Nationalist Congress Party (NCP) said that in the past three months, the BJP government had raised fuel prices several times. “Lowering the mere Rs 2 VAT on fuel will not give much relief to people. People are already suffering from inflation. The BJP government should reduce VAT by Rs 5 at least in fuel prices. We also demanded lift the Rs 11 as a drought has lasted a long time, why should people keep paying the drought tax? “Asks Malik.