Bihar issued an ordinance reducing sales tax on both petrol and diesel by 2.5 per cent and 1.64 per cent, respectively. Maharashtra cut sales tax on petrol and diesel by 2 per cent each to 25 per cent and 23 per cent, respectively. It waived off the entire 4 per cent VAT on LPG. The cuts will cost the exchequer Rs 730 crore annually. Punjab, Uttar Pradesh, Himachal Pradesh and Uttarkhand came down heavily on the Centre for raising fuel prices. While UP chief minister Mayawati said her state would not mind cutting sales tax rates, she did warn of a nationwide stir if the Centre did not roll back the hikes. Uttarkhand chief minister B C Khanduri said 95 per cent of total taxes on fuel products went to the Central kitty, and ruled out any tax cuts. Himachal CM Prem Kumar Dhumal said his state was taxing diesel by only 14 per cent compared with most states that had a sales tax of 20 per cent on it. “There is no plan to cut sales tax further,” he said.

Kerala said it would cut sales tax rates once its finance minister returned from tour. Though Karnataka’s BJP chief minister B S Yeddyurappa initially ruled out any cuts, another minister V S Acharya said the state would take a call during the Budget session that will start in the first week of July. While sales tax in Karnataka is 25 per cent on petrol products, the total revenue is approximately Rs 3,200 crore per annum. Karnataka can afford 2.5 per cent cut in sales tax without considering inflation and upsetting revenues, say officials.

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