New Delhi: The Central Government had recently cut the excise duty on petrol and diesel. Petrol was cut by Rs 8 per liter and on diesel by Rs 6 per liter. Thereafter, the prices came down drastically. According to SBI's research report, there is still space left with the states to cut VAT (VAT on Petrol-Diesel). After the decision of the Center, states like Maharashtra, Rajasthan, Kerala, Tamil Nadu, Madhya Pradesh, Karnataka, Goa and West Bengal have cut VAT.

According to the report, the states collected Rs 49229 crore as VAT in the financial year 2021-22 amid rising oil prices. Due to the reduction in excise duty, VAT has come down by Rs 15021 crore. Despite this shortfall, the states still have the space to cut VAT by Rs 34208 crore. Gaurav Dua, Head of Capital Market Strategy, Sharekhan, said that there are 5 major components in the price of petrol and diesel. Base price, rent, excise duty, dealer commission and VAT. Value Added Tax (VAT) is calculated on the basis of the base price, rent, excise duty and dealer commission. By adding the value of these four, a certain percentage of it is collected by the states in the form of VAT. In such a situation, when the prices of petrol and diesel increase in the international market, the VAT collection of the states increases due to the increase in the base price. If the central government cuts excise duty, the overall value decreases. Because of this, VAT is also reduced by default.

This is the second reduction in excise duty after November. On the occasion of Diwali, excise duty was cut by Rs 5 on petrol and Rs 10 per liter on diesel. This time there was a cut of Rs 8 on petrol and Rs 6 on diesel. Thus the total deduction on petrol has been Rs 13 and on diesel Rs 16.

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