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Hours after the central government cut excise duty on petrol and diesel on the eve of Diwali, several states announced additional reductions in fuel prices. 

Petrol price on Thursday was cut in the range of 5.7 to 6.35 per litre across the country and diesel rates by 11.16 to 12.88 as oil companies passed on a record reduction in excise duty rates to consumers.

Since states charge local sales tax or VAT not just on the base price but also on the excise duty levied by the Centre, the total incidence of price reduction is higher. The reduction was larger in states with higher VAT.

These states include Assam, Tripura, Manipur, Karnataka, Goa, Uttar Pradesh, Gujarat, Himachal Pradesh, Haryana, Uttarakhand, Bihar, Odisha and Arunachal Pradesh.

While Gujarat, Assam, Tripura, Manipur, Karnataka and Goa reduced the prices of both petrol and diesel by 7 per litre in addition to Centre's 5 and 10 relief, Uttarakhand reduced the Value Added Tax by 2. 

In Odisha, VAT has been reduced by 3 per litre on both petrol and diesel. It has been cut by 3.20 per litre on petrol in Bihar and 3.90 on diesel.

Further, the Uttar Pradesh and Haryana governments on Thursday said that the prices of diesel and petrol in the state will be reduced by 12 per litre each.

Himachal Pradesh Chief Minister Jairam Thakur has announced that the state government has reduced VAT on petrol and diesel.

“Now petrol will be cheaper by 12 and diesel by 17 per litre in the state," wrote the Himachal Pradesh CM on Twitter.

Arunachal Pradesh CM Pema Khandu today announced reduction of Value Added Tax (VAT) on petrol and diesel.

"Consumers will benefit by 10.20 per ltr in petrol & 15.22 per ltr in diesel after the relief given both by Centre and State Govt," CM tweeted. 

Madhya Pradesh government also announced reduction of VAT on petrol and diesel by 4%.

In Delhi, the reduction in petrol price was 6.07 per litre and that on diesel was 11.75, according to a price notification of state-owned fuel retailers.

The lowest reduction in petrol price was in Dadra and Nagar Haveli and Daman and Diu where rate was cut by 5.7. Rajasthan saw the biggest drop of 6.35 a litre.

For diesel, Chennai had the lowest reduction of 11.16 per litre while Odisha had the biggest at 12.88 a litre. Petrol price in Chennai has been reduced by 5.26 to 101.40 per litre and diesel by 11.16 to 91.43 per litre.

In addition, half a dozen BJP-ruled states have announced a cut in VAT rates but a formal notification has so far been issued only in case of four. Puducherry saw an additional 7 a litre reduction in both petrol and diesel price because of the cut in value added tax (VAT).

Goa saw an additional 5.47 a litre cut in petrol and 4.38 on diesel.

This came hours after the Centre urged the states "to commensurately reduce" VAT on petrol and diesel to give relief to consumers.

It said that the 5 and 10 cut in Central Excise Duty on petrol and diesel respectively is the highest-ever reduction in excise duty and rolls back a part of the 13 and 16 per litre increase in taxes on the motor fuels effected between March 2020 and May 2020.

That hike in excise duty had taken central taxes on petrol to their highest level of 32.9 per litre and that on diesel to 31.8 a litre.

The total increase in petrol price since the 5 May 2020 decision of the government to raise excise duty to record levels now totals 38.78 per litre.

Diesel rates have during this period gone up by 29.03 per litre.

Fuel prices today 

Petrol will cost 103.97 per litre in Delhi from Thursday as against 110.04 per litre, according to a price notification of state-owned fuel retailers.

Diesel rates accordingly will reduce to 86.67 per litre from 98.42 per litre.

In Mumbai, petrol price has been cut by 5.87 to 109.98 per litre and diesel by 12.48 to 94.14 per litre. Kolkata saw the price of diesel being reduced by 5.82 to 104.67 per litre and that of diesel by 11.77 to 89.79 per litre.

The excise duty cut announced on Wednesday night was the highest-ever reduction in excise duty. It rolls back a part of the 13 and 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices at the onset of the COVID-19 pandemic.

Reducing the excise duty, the union government also urged states to commensurately reduce VAT on petrol and diesel to give relief to consumers.

The tax cut follows an unrelenting hike in international oil prices pushing pump rates across the country to their highest-ever levels. While petrol soared to above 100-a-litre-mark in all major cities, diesel had crossed that level in more than one-and-a-half dozen states.

The relentless increase in fuel prices had been severely criticised by Opposition parties, particularly Congress which had demanded that the government reduce its excise duty.

Based on April to October consumption numbers, the loss of revenue to the government due to the excise duty cut will be 8,700 crore per month. This totals to an annual impact of over 1 lakh crore, industry sources said. For the remainder of the current fiscal, the impact would be 43,500 crore.

Data available from the Controller General of Accounts (CGA) in the Union Ministry of Finance showed excise duty collections during April-September 2021 surged to over 1.71 lakh crore, from 1.28 lakh crore mop-up in the same period of the previous fiscal.

For the full 2020-21 fiscal, excise collections were 3.89 lakh crore and 2.39 lakh crore in 2019-20, the CGA data showed.

After the introduction of the Goods and Services Tax (GST) regime, excise duty is levied only on petrol, diesel, ATF and natural gas. All other goods and services are under the GST regime.

Minister of State for Petroleum and Natural Gas Rameswar Teli had in July told Parliament that the union government's tax collections on petrol and diesel jumped by 88 per cent to 3.35 lakh crore in the year to March 31, 2021 (2020-21 fiscal) from 1.78 lakh crore a year back.

Excise collection in pre-pandemic 2018-19 was 2.13 lakh crore.

With inputs from agencies

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