Delhi Chief Minister Arvind Kejriwal on Thursday announced a reduction in value added tax or VAT applicable to diesel to 16.75%, which would bring down the price of the fuel by more than Rs 8 per litre in the national capital. Until now, the value added tax was at 30% in Delhi.
Currently, the rate of diesel is Rs 81.94 per litre in the metro, almost 2% higher compared to petrol, which is at Rs 80.43 per litre. Diesel has remained more expensive than petrol in Delhi for past few weeks.
Currently, diesel retails at ₹81.94 per litre in Delhi while petrol at ₹80.43. In India, the price of petrol and diesel you pay at the pump is dependent on international product prices and other market conditions. Petrol and diesel do not come under the purview of goods and services tax (GST).
10 things to know:
- The move on value added tax will help propel Delhi’s economy, the Chief Minister said while announcing the rate cut through a virtual press briefing.
- Reviving Delhi’s economy is a serious challenge, but will be achieved with the cooperation of people, Kejriwal said. The Chief Minister said traders and industrialists had demanded a cut in VAT.
- The price of diesel will come down to Rs 73.64 a litre with the reduction in VAT, he said. The decision was taken in a meeting of the Delhi Cabinet chaired by the chief minister.
- With effect from 6 am on Thursday, the price of diesel was at Rs 81.94 per litre in Delhi, and that of petrol at Rs 80.43 per litre.
- The gap between petrol and diesel rates has been increasing in the metros over past few days, with diesel remaining costlier than petrol in the national capital.
- Petrol and diesel prices are determined broadly by crude oil and forex rates, and vary in different parts of the country due to the incidence of VAT or value added tax.
- The retail fuel prices – the price that the consumer pays for fuel in different parts of the country – are calculated by adding excise duty, dealer commission and VAT on the rate applicable to dealers
- State-run Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum review the prices on a daily basis, and implement any revisions with effect from 6 am. The three account for the majority of fuel stations in the country.
- A crash in travel demand due to the spread of the coronavirus pandemic has hurt oil markets. Currently, global crude oil prices hover around the $44 per barrel mark.
- Though Brent crude futures – the global benchmark for oil rates – have recovered from a 21-year low of $15.98 per barrel registered in April, they are still down 33% so far this year.
BJP supports move but says not enough
The Opposition BJP supported the Delhi government’s decision to slash VAT rates and in effect reduce diesel prices here but said it was not enough.
Leader of the Opposition in the Delhi Legislative Assembly, Ramvir Singh Bidhuri, said the decision would definitely provide relief to the people but VAT on diesel needed to be reduced to 12.5% and to 20% on petrol. “Before Kejriwal came to power, VAT in Delhi was charged at the rate of 12.5% on diesel. This was increased from 12.5 to 30% during the Kejriwal government’s tenure while the VAT on petrol was also increased from 20% to 30%,” Bidhuri said.
“If the government wants to give relief to the people of Delhi, then it should charge VAT at the rate of 12.5% on diesel and 20% on petrol. Ever since the government increased the VAT rate on diesel and petrol, the BJP has been demanding a reduction,” he added.