Tax Relief

Gas tax relief on the middle: extra states, union territories proceed to comply with, decrease worth added tax

A TOTAL of 18 states and 6 union territories have cut taxes on car fuel after the center cut excise duties on gasoline and diesel by Rs 5 and Rs 10 per liter, respectively.

All 17 NDA-led states, including Gujarat, Uttar Pradesh, Karnataka, Bihar, and Haryana, have lowered state taxes on gasoline and diesel.

States and Union Territories that have not reduced value added tax (VAT) on gasoline and diesel are Maharashtra, Tamil Nadu, West Bengal, Punjab, Telangana, Andhra Pradesh, Kerala, Jharkhand, Chhattisgarh and Delhi.

Other states that have cut taxes on gasoline and diesel are Madhya Pradesh, Himachal Pradesh, Tripura, Manipur, Goa, Assam, Uttarakhand, Sikkim, Mizoram, Nagaland, Meghalaya, Arunachal Pradesh, and Biju Janata Dal-regated Odisha.

The UTs of Jammu and Kashmir, Chandigarh, Ladakh, Puducherry, Lakshadweep as well as Dadra and Nagar Haveli and Daman and Diu have also reduced VAT on gasoline and diesel, according to a statement from the Ministry of Oil.

A steady surge in crude oil prices and increased taxes, both central excise tax and state taxes, in effect since May 2020, played a key role in pushing the price of auto fuel above pre-Covid retail price levels this year.

Between February and May last year, the government increased excise taxes on gasoline and diesel by 13 rupees per liter and 16 rupees per liter, respectively, while revenues fell sharply due to the Covid-19 pandemic and related restrictions.

A number of states had also increased state taxes on gasoline and diesel to shore up revenues in the face of falling tax revenues on goods and services.

The additional cuts in VAT on gasoline and diesel have caused prices in certain states to fall by as much as 12 rupees per liter of gasoline and 17 rupees per liter of diesel. Gujarat, Manipur and Assam are among the states that have cut sales tax on gasoline and diesel by 7 rupees per liter each.

Some states, including Haryana, Uttar Pradesh, and Karnataka, have announced that cuts in state taxes would cut car fuel prices by 12 rupees per liter each, including the impact of the center’s excise duty cut.


When it announced the cut in excise duties, the government called on the states to “lower the value added tax on petrol and diesel appropriately in order to relieve the burden on consumers”.

The center had found that the drop in fuel prices would boost farmers during the upcoming Rabi season and also help middle and low income households by curbing inflation and stimulating consumption in the economy.

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