To shore up revenues during the coronavirus-induced lockdown, the cash-strapped Odisha government has hiked value added tax (VAT) on petrol and diesel. As a result, the two fuels have now become costlier by ₹3.11 per litre and ₹1.03 per litre, respectively.
After the VAT hike, the retail sale price of petrol at Bhubaneswar is ₹71.69 per litre and diesel ₹67.73 per litre. The Odisha government has hiked VAT on petrol from 26% to 32% and on diesel from 26% to 28% with effect from Saturday midnight.
The collection of additional revenue would be utilised for delivery of services in health, education and other social sectors, a government statement said.
The last revision of VAT on petrol and diesel in the state was made on January 5, 2016 when it was hiked from 23% to 26%.
The Centre is collecting total tax of ₹32.98 per litre on petrol and ₹31.83 per litre on diesel, whereas the Odisha government will collect VAT of ₹16.60 per litre on petrol and ₹14.34 per litre on diesel after the price revision.
The government said that the retail sale price of petrol in Bhubaneswar will be less than most other cities in India and the retail sale price of diesel in Bhubaneswar will be less than or at par with other cities in India after the VAT increase.
Since March, a number of state governments and union territories across India have been hiking VAT as fuel is one of the biggest revenue generators for them. The central government too had recently hiked excise duty on petrol by ₹10 a litre and on diesel by ₹13 a litre. The hike in excise duty did not lead to a price across India as the state-run fuel retailers adjusted the price hike against a reduction in crude oil prices.
However, any hike in VAT imposed by state governments is passed on to consumers. In most cities now, tax comprises around 70% of the retail selling price of petrol and diesel.