3% VAT hike on petrol, diesel comes into effect

Bhubaneswar: The State government decision to increase Value Added Tax (VAT) on petrol and diesel by 3 per cent has come into effect from today. With this hike the prices of Petrol and Diesel have gone up by Rs 1.39 and Rs 1.14 per litre respectively.

As per the government’s decision, an additional VAT of 3% will be levied on petrol and diesel sold in Odisha from today. With this, the total VAT on petrol and diesel now stands at 26%, up from 23% earlier.

“By increasing the VAT by 3 percent on petrol and diesel, the state government will get additional revenue of Rs 361 crore per year. It would amount to Rs 90 crore additional revenue in the next three months during the current fiscal,” Finance minister Pradip Kumar Amat said justifying the hike.

BJD spokesperson Samir Das blamed the Centre for forcing the state government’s hands. “Had the central government passed on all the benefits of declining oil prices, the price of petrol would have been significantly lower. Just as the central government is manipulating the prices of petrol and diesel in a bid to protect its revenue generation, the State government also has to take steps to ensure that its revenue generation is not significantly dented. Moreover, the central government has also visibly reduced its assistance for various schemes to the State governments, which are funding them on their own. The Odisha government has taken the step to ensure ample revenue generation,” he said.

The two major Opposition parties – Congress and BJP – have predictably taken the government to task for the hike.

“The State government only sheds crocodile tears for the people of Odisha but is least concerned about their miseries. VAT was increased twice in 2014 and this increase will put an additional burden on the consumers. Ironically, the State government was vehemently protesting the hike in petrol and diesel prices during the UPA regime,” said Congress leader Sulochana Das.

“The premise of the VAT hike is flawed and it is an example of a bad taxation policy of the State government. This hike will hurt the consumers and will lead to price rise of other commodities. The State government should not earn revenue by bringing misery for consumers,” said BJP spokesperson Sajjan Sharma.

The state cabinet had decided to hike VAT on petrol and diesel on December 31 and had entrusted the responsibility to review the implications of the VAT hike and decide on the quantum of hike to the Finance department. .

In pursuance to this, the Finance department issued a notification citing a 3% increase in VAT yesteray, informed sources. The hike will come into effect from today.

The State government has contended that there has been a significant tax revenue loss for the exchequer on account of a steep fall in oil prices internationally. The government is losing Rs 470 crore every year on account of low oil prices, informed sources.