Amid mounting concern over the rising cost of fuel and calls to cut the Value Added Tax (VAT) imposed by State governments on petrol and diesel, the Tamil Nadu government on Monday made it clear that it was not in favour of such a move, since the revenue from VAT formed a major component of the State’s Own Tax Revenue (SOTR).
When asked whether the State government would cut VAT on fuel, Minister D. Jayakumar, who has been coordinating with the Centre in the GST Council, said the government would be following the decision taken by former Chief Minister Jayalalithaa.
Underscoring the significant contribution that the VAT on fuel prices made to the SOTR, he said, “That being the case, do you think we should bring fuel prices under the purview of GST?”
“The SOTR comes mainly from petroleum products and liquor meant for human consumption, which are the revenue generating sources. If the State government brings them under the GST’s purview, our SOTR will be affected,” he said.
“If, for example, ₹100 was generated through VAT on fuel prices, the amount could be used for laying roads and developing infrastructure such as street lighting. If it [fuel] is brought under the purview of GST, we will get only ₹50, and do you think the other ₹50 will come back?” he asked.
