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The slash in petrol prices did not benefit vehicle users in the state for more than 24 hours. Barely had the Union government announced a cut in prices by Rs 2.16 per litre on May 15, which was to be effective from midnight on Monday, than the state government increased the value added tax (VAT) surcharge on the fuel by around Rs 2 from May 17, top sources in the state's finance department and oil marketing companies told TOI.
An official notification in this regard will soon be released, but the hiked rates have already been introduced in the state's petrol retail market. While diesel prices were also cut on May 15, the state has not increased the VAT surcharge on this fuel.
On April 21 this year, the state government had increased the surcharge collected along with VAT from Rs 6 to Rs 9, making petrol prices in Mumbai and Pune among the highest in the country. With the latest hike, the surcharge has gone up to Rs 11.
Asked if VAT would be reduced if petrol prices were increased by the Union government in future, a senior official from the state finance department told TOI, "Whether or not it will be reduced will be a cabinet decision."
Finance department officials said the state government's revenue loss on account of the cut in petrol and diesel prices on Monday would have been to the tune of Rs 850 crore. To make up for that, the state government immediately raised the VAT surcharge. The new rate for petrol in Pune will now be Rs 77.52 per litre as against the earlier price (after reduction) of Rs 75.19. The new rate in Mumbai will be Rs 76.76 as against the earlier Rs 74.24.
"With the Union government slashing petrol and diesel prices, the state's revenue would have witnessed a significant dip. VAT includes two parts: percentage of sale price and the fixed amount. To offset the revenue loss of Rs 850 crore, the VAT surcharge was increased on petrol from May 17," the finance department official said.
Sources in the industry said petrol and diesel are major sources of revenue for the government. "With the state government reeling under debt, it used the opportunity to increase VAT after the Union government slashed the petrol and diesel prices recently," a source said.
Ali Daruwalla, spokesperson, All India Petrol Dealers Association (AIPDA), said the new petrol rate in Pune will now be Rs 77.52 per litre and that of power petrol Rs 80.01 per litre. "The rates may vary across petrol pumps by 25 paise per litre due to dynamic pricing," he added.
In Maharashtra, the Mumbai-Thane-Navi Mumbai belt pays a peak VAT rate of 26% while the rest of the state pays around 25%.
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