Delhi cuts VAT to reduce prices

Following the footsteps of Andhra Pradesh government, the Delhi government on Tuesday changed state levies so as to bring down the price of petrol by 67 paise and of diesel by 22 paise.

The move will result in a revenue loss of Rs 102 crore for the Delhi government.

Petrol will now cost Rs 46.84 per litre and diesel will be available at Rs 32.35 per litre once the new rates come into existence.

The new prices are a result of the Delhi government decision to remove the value added tax component of Rs 4 and Rs 2 increase in the petrol and diesel prices respectively.

The partial relief comes just a week after the Centre hiked the price of petrol and diesel by Rs 4 and Rs 2 respectively. Other than Andhra Pradesh government, the Tamil Nadu government recently calibrated state levies in order to reduce the price hike of diesel.

Andhra Pradesh has reduced the sales tax on petrol to 33 per cent from 34 per cent and on diesel to 23.5 per cent from 24 per cent.

"The new prices will come into force within a week following notification of the government's decision," Delhi Finance Minister AK Walia told reporters after a meeting of the Cabinet chaired by Chief Minister Sheila Dikshit.

While the VAT rate on petrol is 20 per cent, diesel is taxed at 12.5 per cent in the capital. "We have done whatever we could to give relief to Delhi households from the hike in fuel prices. We will not be charging any VAT on the increased amount," Walia said.

On whether similar step would be taken for reducing prices of the compressed natural gas, which have also gone up, Walia said Delhi government did not charge any VAT on the green fuel.