The whole yearly cost of gasoline tax reduction would be paid by the Centre, according to Finance Minister Nirmala Sitharaman.

A day after announcing a significant gas tax cut, Union Finance Minister Nirmala Sitharaman stated on Sunday that the two rounds of obligation cuts—the final one in November—will cost the exchequer Rs 2.2 lakh crore annually, and the states’ share of the tax pool will not be affected because the Centre chose to reduce cess on petrol and diesel, which are not divisible.

Non-BJP-governed governments, however, resisted matching the Centre’s transfer by lowering VAT. Most of them noted that because VAT is generally imposed as a percentage of the value (ad valorem) after incorporating central levies and other charges, the substantial decrease in excise duty has automatically reduced the tax in most states.