The reduction would cost the government Rs 260 crore a year. The decision was taken in deference to the appeal made by Prime Minister Manmohan Singh to the states to share the burden of the people by slashing Sales Tax on petroleum products. The decision was also in deference to the suggestion from Leader of the Opposition and AIADMK General Secretary J Jayalalithaa, an official release here said.
The Prime Minister, who had described the price hike as ''bare minimum,'' urged state governments, which collected hefty Sales Tax on petroleum products, to share the burden by cutting levies.
It said when the Centre hiked the prices of petroleum products in 2006, the state government had reduced the Sales Tax on diesel from 25 per cent to 23.43 per cent.
After the Centre lowered the price of diesel, the state government maintained the lowered Sales Tax due to which it was incurring a revenue loss of Rs 200 crore a year.
The reduction of two per cent of Sales Tax would cost the government an additional Rs 260 crore a year, the release added.
Referring to Ms Jayalalithaa's suggestion to reduce the Sales Tax, the DMK Government recalled her reaction when the then Leader of the Opposition S R Balasubramaniam wanted her government to cut Sales Tax on petroleum products.
When the Congress leader made the suggestion, she had criticised him for giving a suggestion to the government for losing its income and getting entangled in economic crisis.
She had asked Mr Balasubramaniam to give the suggestion to the Congress-ruled states.
However, Ms Jayalalithaa had made a similar suggestion and the DMK Government accepted the suggestion to the extent possible, the release said.