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The Opposition Congress cried foul, alleging that the step has been taken by the government with an eye on the upcoming state poll and is a result of the pressure built up because of the response to Congress Vice-President Rahul Gandhi's campaign tour in the state.
With this rate cut, the price of petrol will come down by Rs 2.93 and that of diesel by Rs 2.72 in the state, he said. The effective price of petrol in Gujarat from mid-night today will be Rs 67.53 per litre and that of diesel Rs 60.77 per litre, the chief minister said.
The state earns around Rs 12,000 crore per annum through VAT. Because of the reduction in VAT, the state government now stands to lose out Rs 2,316 crore annually.
The Gujarat government earlier used to charge 24 per cent VAT on petrol and diesel and an additional 4 per cent cess. Now, the effective VAT will be 20 per cent plus the 4 per cent cess.
The last time the state government had hiked VAT on fuel was in January 2016 when the international crude prices were falling.
"We have taken this decision in the interest of the people. The decision should not be considered to have any links with the polls. This is only aimed at giving relief to the people and it is a permanent decision," Rupani said.
The Centre had recently brought down the excise duty on petrol and diesel by Rs 2 per litre.
"The rate reduction has been done with an eye on polls. They (government) have come under pressure after looking at the response Congress Vice-President Rahul Gandhi has been getting during his campaign tour in Gujarat," Congress' spokesperson Shaktisinh Gohil said.