‘States to forego Rs 44,000 cr from VAT reduction on fuels'

However, higher central tax devolution of Rs 60,000 crore will offset losses

MUMBAI: The states will forego around Rs 44,000 crore of tax revenue after they reduced VAT on petrol and diesel in the remainder of the fiscal but higher central tax devolution of Rs 60,000 crore will offset the losses, according to a report.

After months of calls for lowering the taxes on the fuels, the Centre on November 4 cut excise duty on diesel by Rs 10 a liter and by Rs 5 on petrol. Following this, as many as 25 states and Union territories have lowered value-added tax (VAT) on these fuels.

The FY22 revenue loss of the states from tax cut is around Rs 44,000 crore, of which Rs 35,000 crore is by way of lower VAT and the rest indirectly, Aditi Nayar, chief economist at rating agency ICRA, told reporters on Thursday.