States gained Rs 49k crore when fuel prices rose, have room to cut VAT: SBI

States gained Rs 49,229 crore from VAT revenue on fuel when oil prices were increasing and will forego Rs 15,021 crore now that excise duty on fuel has been cut, SBI Research said in a report

States have room to cut value added tax (VAT) on petrol and diesel as they gained Rs 49,229 crore from VAT revenue on fuel when oil prices were increasing and will forego Rs 15,021 crore now that retail prices have been downwardly adjusted through excise cut, State Bank of India Research said in a report on Monday.

The VAT charged by states is ad-valorem, which means their VAT collections rise when petrol and diesel prices increase and get reduced automatically when the Centre cuts excise duty.

“This implies that gains still outstrip the revenue forgone by Rs 34,208 crore and