PUDUCHERRY: After levying special excise duty on liquor, the government has now effected a steep hike in Value Added Tax (VAT) on petrol and diesel in the Union Territory with effect from May 29, but has kept the price lower than that in Tamil Nadu.
According to a gazette notification on May 27, the VAT for petrol in Puducherry and Karaikal region of the Union Territory has been enhanced to 28 percent, an increase of 5.85 percent, while for diesel the VAT is 21.8 percent, an increase of 3.65 percent.
In Mahe region, the VAT for petrol has been raised to 23.9 percent, an increase of 1.75 percent, while there is no change in VAT on diesel which remains at 18.15 percent. In Yanam region, VAT for petrol will be 25.7 percent, which is a 3.55 percent increase, while the VAT on diesel is 20 percent, an increase of 1.85 percent.
Finance Secretary Surbir Singh said the increase would be in effect for three months from the date of notification.
It may be noted that the administration had enhanced the VAT by one percent on April 10 to mobilize funds for the health department to tackle COVID-19. Accordingly, the tax on petrol was raised to 22.15 per cent and on diesel to 18.15 per cent in all regions of the UT.
Now, the government has deviated from uniform VAT in the four regions of the UT and has gone for variable rates of VAT on petrol and diesel. It has been done by keeping the prices of petrol and diesel just a little lower than the adjoining state of Tamil Nadu (for Puducherry and Karaikal), Kerala (for Mahe) and Andhra Pradesh (for Yanam), so that vehicles from there prefer filling their tanks in the UT and the government earns revenue as it has been doing.
At present, petrol is being sold at Rs 69.39 per litre and diesel at Rs 65.16 per litre in Puducherry and Karaikal. According to petroleum dealers, this is expected to go up by around Rs 3 for petrol and Rs 1.80 for diesel (the rates are yet to be declared by oil companies).
The cost of petrol and diesel in Puducherry will still be lower than in Tamil Nadu where petrol is priced at Rs 76.46 and diesel at Rs 69.10.
The huge hike in VAT may reduce the volume of sales as the price difference between Puducherry and Tamil Nadu will be minimal and TN customers may not be attracted, says A Murugesan, Secretary of Petroleum Dealers Association.