The DMK government in poll-bound Tamil Nadu today announced a three per cent cut in sales tax on petrol that would make it cheaper by Rs 1.38 a litre.

Chief Minister M Karunanidhi made the announcement a day after the presentation of the Union budget which skirted the demand for reduction of customs duty and sales tax on fuel prices amidst soaring global crude rates.

"The government has decided to levy only 27 per cent as against 30 per cent as sales tax on petrol. This will result in a loss of Rs 210 crore for the exchequer annually but will bring down the price of petrol by Rs 1.38 per litre," he said in a statement here.

He said the tax cut would be with immediate effect and the new rate of 27 per cent was the lowest among southern states.

Explaining the rationale behind the tax cut, that comes ahead of state Assembly election due in April-May, Karunanidhi said it was done to ensure that two-wheeler users did not feel the pinch of 'frequent' hike of fuel prices by oil companies.

"Since global crude rates are on the upswing, oil companies also revise the prices accordingly which affect middle-classes to a large extent," and this was the reason the government slashed sales tax on fuel on different occasions, Karunanidhi said.

He recalled that his government had slashed sales tax on diesel and petrol on previous occasions also when fuel prices were hiked.