AP GOVT'S VAT HIKE BOOMERANGS

The state increases the tax and wanted to generate more revenue, but it proved counterproductive. Ever since the TDP government in Andhra Pradesh increased the Value Added Tax (VAT) on petrol and diesel steeply, commercial vehicles, especially diesel consumers, have preferred to buy their fuel from the neighbouring states of Karnataka, Tamil Nadu and Odisha. As a result, the state ended up losing VAT rather than net additional income.
Effective from March 1, AP added a flat surcharge of Rs 4 per litre of petrol and diesel in addition to the 22.25 per cent it levies as VAT. While it has not affected the petrol consumers much, diesel users, especially the commercial vehicles which consume a lot of fuel, have been hit hard. Because of the additional Rs 4 sur charge, the price of diesel in AP has shot up to Rs 58 from Rs 54 per litre.Earlier, by levying 22.25 per cent VAT, the state was netting Rs 10 per litre of diesel and hoped to increase it to Rs 14 per litre and make an additional income of Rs 1,300 crore per year.
However, AP diesel consumers in the bordering districts are opting to buy the fuel out of state. While those in Chittoor, Kurnool, Anantapur and Nellore are filling up their tanks in Karnataka and Tamil Nadu, the ones in Vizianagaram are doing so in Odisha. The price of diesel is cheaper by Rs 5 per litre in Tamil Nadu, Rs 4 in Karnataka and Rs 3.50 in Odisha.
The official figures have reflected the decline in the consumption of diesel in AP. As compared to sale of 1.49 lakh litres of diesel in AP, from March 1st to March 15th last year, a sale of only 1.21 lakh litres of diesel was recorded during the same period this year. As against Rs 150 crore that the state netted as VAT revenue last year, in the first fortnight of March, the figure was Rs 169 crore this year.“By our calculation, with VAT at Rs 14 per litre, the state should have earned revenue of Rs 210 crore keep ing in mind the number of litres sold.However, that did not happen,“ said sources in the finance department.
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