Gandhinagar, Oct 10 (PTI) The Gujarat government has decided to reduce the value added tax (VAT) on petrol and diesel by 4 per cent, state Chief Minister Vijay Rupani said today.

The reduction in tax comes just before Diwali in the state, where the Assembly polls are due around the year-end.

"After the central government's instructions, Gujarat has decided to reduce VAT on petrol and diesel by 4 per cent from today mid-night," Rupani said at a press meet here.

With this rate cut, the price of petrol will come down by ₹ 2.93 and that of diesel by ₹ 2.72 in the state, he said.

The effective price of petrol in Gujarat from mid-night today will be ₹ 66.53 per litre and that of diesel ₹ 60.77 per litre, the chief minister added.

Because of this move, the state government will suffer a loss of ₹ 2,316 crore annually.

"But we have taken this decision in the interest of people," Rupani said.

The lowering of tax in the poll-bound Gujarat follows Union Finance Minister Arun Jaitley recently writing to all state governments nudging them to reduce taxes on petrol and diesel.

The Centre had recently brought down excise duty on petrol and diesel by ₹ 2 per litre.

VAT reduction on fuel lowers retail petrol and diesel prices in state after central guidance. The state reduced the value added tax on petrol and diesel by four percentage points effective at midnight, producing immediate reductions in retail petrol and diesel prices; the cut follows central guidance and a recent central excise duty reduction and is projected to produce a measurable annual loss to state revenues.