Less than a week after the Central Government cut excise on fuel by Rs 2, the Maharashtra government has slashed the Value Added Tax (VAT) on petrol and diesel by Rs 2 and Re 1 respectively.
The decision comes after Union Finance Minister Arun Jaitley directed all Chief Ministers to reduce the VAT on fuel in their respective states to make it cheaper. Maharashtra is the second state, after Gujarat, to pay heed to the diktat.
After the new prices come into effect from midnight tonight, petrol and diesel are expected to cost around Rs 75.5 and Rs 59.5 in Mumbai.
Just last week, the prices of petrol and diesel in the city were at a three-year high as they were hovering around the Rs 81 and Rs 61 mark respectively.
At present, the Maharashtra government ears over Rs 19,000 crore by levying VAT on petrol on diesel. It levies 46.52 percent VAT on petrol in the state, the highest in the country.
The VAT on petrol is Mumbai, incidentally, is even higher at 47.64 percent.
Although the price of diesel is relatively lower than a few other states, the decision to cut down VAT on diesel is likely to help dealers who tend to lose business to the more economical neighbouring states.
Earlier, on October 4, the Central Government had reduced the excise duty on petrol and diesel by Rs 2. The reduction is expected to cost the centre approximately Rs 13,000 crore in the current fiscal.