With the Congress-led coalition facing flak from both friends and foes of the United Progressive Alliance and supporting Left parties which have called bandhs in states ruled by them, Gandhi suggested to Congress chief ministers to lower sales tax on petroleum items.
Congress is in power in around half a dozen states, prominent among them being Maharashtra, Assam, Jammu and Kashmir, Andhra Pradesh and Haryana.
Gandhi's suggestion comes a day after Prime Minister Manmohan Singh asked state governments to reduce the taxes and levies on petrol, diesel and other petro products.
In his televised address to the nation, Singh said on Tuesday: "The central government, oil companies and consumers are bearing a part of this immense burden.
"It is, therefore, incumbent on state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies".
The Left-ruled West Bengal government has already slashed sales tax on petrol and diesel by up to five per cent giving a relief of Rs 2.12 and Rs 1.38 a litre on the two fuels respectively.
The government on Wednesday raised the prices of petrol by Rs 5 a litre, diesel by Rs 3 a litre and LPG cylinders by Rs 50 per cylinder, evoking strong protests from both the opposition and alliance parties.
The Congress had justified the government's decision to increase petroleum prices, saying 'minimum possible burden' has been put on the common man, but main opposition BJP felt the UPA has unleashed 'economic terror' on the people.
Reacting quickly to the hike, the Left parties announced week-long nationwide protests from Thursday.
RJD General Secretary Vijay Krishna, whose party is the second largest constituent of UPA, demanded an immediate rollback, warning that the move was 'steps towards death warrant of UPA', while PMK, another constituent of the ruling combine, also demanded that the government reconsider the hike in price of LPG.
Bihar cuts sales tax: Bihar government on Thursday promulgated an ordinance reducing sales tax on petrol and diesel.
The sales tax on petrol was reduced by 2.5 per cent from 27 per cent to 24.5 per cent and 1.64 per cent on ordinary and high speed diesel from 20 per cent to 18.36 per cent, the commissioner-cum-secretary of commercial taxes department, Shubhkirti Mazumdar told PTI.
Sales tax on cooking gas was not reduced as LPG is a 'declared commodity' under central sales tax, he said.
The state-run oil companies have been informed of the step and they would accordingly work out the retail prices, Mazumdar said.
The ordinance, promulgated early Wednesday, follows Chief Minister Nitish Kumar's promise on Wednesday to mitigate the impact of the hike in prices of fuel.
Kumar had assailed the Centre for the steep hike in fuel prices on Wednesday, saying it would further fuel inflation and have a cascading effect on prices of various commodities that would adversely impact development.
"It is unfortunate that the Centre raised the prices of petroleum products without taking any measure to avoid passing on the huge burden to the consumers who are not in a position to afford it," he had said.
TN too slashes sales tax: Tamil Nadu government too on Thursday slashed the sales tax on diesel by two per cent which will cause a revenue loss of Rs 260 crore (Rs 2.6 billion) per annum for the state.
Announcing the decision, Chief Minister M Karunanidhi said that Prime Minister Manmohan Singh had advised the states to reduce the sales tax on petroleum products.
Many opposition parties had also sought reduction on sales tax and he had decided to accede to the request.
Sales tax on diesel, which was attracting 25 per cent before the price revision in 2006, was reduced to 23.5 per cent then costing the exchequer Rs 200 crore (Rs 2 billion). With today's reduction, it would mean a further loss of Rs.260 crore per year for the state, he said.
On AIADMK chief Jayalalithaa's demand for reduction in sales tax on petroleum products, he said when she was the chief minister, she declined to accept the request of the then Congress Legislature party leader S R Balasubramanian to reduce the tax.
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