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The Puducherry government today said the territorial administration has cut value-added tax (VAT) on petrol by 3%. The decision on the reduction was taken by the Puducherry Chief Minister N Rangasamy at a meeting of the territorial cabinet earlier today and was approved by Lieutenant Governor Tamilisai Soundararajan.

With the cut, the price of petrol would be reduced by 2.43 per litre in Puducherry and Karaikal regions.

Union Finance Minister Nirmala Sitharaman recently ruled out a cut in excise duty on petrol and diesel to ease prices, which have touched an all-time high, saying payments in lieu of past subsidised fuel pose limitations.

Petrol and diesel as well as cooking gas and kerosene were sold at subsidised rates during the previous Congress-led UPA government. Instead of paying for the subsidy to bring parity between the artificially suppressed retail selling price and the cost that had soared because of international rates crossing USD 100 per barrel, the then government issued oil bonds totalling 1.34 lakh crore to the state-fuel retailers.

Sitharaman, who had raised excise duty on petrol and diesel to record high to shore up revenue collections last year, said the interest on oil bonds paid in the last seven years totalled 70,195.72 crore.

Sitharaman said the Centre has kept open the option of inclusion of petroleum products under the Goods and Services Tax (GST) regime. "Whenever states agree on this, it can be brought under the GST."

Inclusion under GST would mean subsuming of excise duty and VAT (levied by states) into one tax. This would help contain the cascading impact of tax-on-tax (VAT being levied on excise duty).

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