There is good news for people living in Kerala as the state government has decided to reduce taxes on fuel. Petrol and diesel will now be cheaper by Rs 1 in Kerala and will come into effect from June 1. Finance Minister Thomas Issac has said tax reduction could lead to a loss of Rs 500 crore. Petrol and diesel price in Kochi on Tuesday was at Rs 81.17 and Rs 73.77, respectively. The decision to reduce tax was taken today at a cabinet meeting of the state .

In the past few days, petrol prices have increased across the country by over Rs 4 per litre. The reason behind the increase in petrol prices in the country is the rise in the crude oil cost and high taxes levied by the central and state government.

NITI Aayog vice-chairman Rajiv Kumar earlier asked states to reduce the tax on petrol. Kumar said, “There is merit in reducing the duties, but both by the states and the Centre. More so for the states as they tax the oil on ad valorem basis … So states can take that cut much more and better than the Union government.”

Petroleum prices do not fall under the ambit of Goods and Services Tax (GST) and are one of the big sources of revenue for the state government.

Maharashtra Chief Minister Devendra Fadnavis last week suggested bringing fuel under the ambit of GST, saying it would ensure reduction of rates. “Once petrol and diesel are brought under the ambit of GST, its threshold will change, because right now, taxes upon taxes are levied which increases rates. GST will ensure a single tax.”

Kerala is one of the states that charge high tax rates on petrol and diesel. Maharashtra and Punjab, however, tops the list when it comes to levying taxes.