Now, be prepared to pay more on your daily quota of liquor, cigarettes and soft-drinks, and gold, diamond jewellery.
Faced with mounting debt and the burden of its servicing along with rising costs of drought-mitigating measures, the state government on Wednesday increased the value added tax (VAT) on these items by 5 per cent.
It also scrapped the local body tax (LBT) on petrol and diesel across the board in 25 municipal corporations and decided to levy an additional tax of Rs 2 per litre on them. Though LBT is not in force in Mumbai, the surcharge will apply to petrol, diesel consumers in Mumbai. The fuel prices in Mumbai will now go up by Rs 2.
The decision will lead to uniformity in the prices of liquid fuels across state (except eight cities like Mumbai, Thane and Navi Mumbai, where an extra surcharge of Rs 1 for infrastructure works is in force), though rates will rise in rural areas where no LBT was levied earlier. This rise, finance minister Sudhir Mungantiwar said would stay in force till the end of the financial year, when the goods and service tax (GST) was expected to come into force.
These measures – to be in force from Thursday – are expected to bring in Rs 1,600 crore to the state exchequer till March-end.
The state government has committed itself to spending Rs 3,332.57 crore for measures like compensation for crop loss, damages to houses, crop insurance, interest waivers and grain at affordable prices to farmers in 14 districts. This is in addition to the Rs 4,210 crore to be spent on scrapping LBT and devolving stamp duty collections to local bodies to make up for the loss and Rs 799 crore to shut down 12 toll projects and waive off toll on cars at 53 toll nakas.
Maharashtra is already groaning under Rs 3.38 lakh crore loans/borrowings and the burden of its servicing to another Rs 27,000 crore per annum. “Even then, we have taken care to ensure that the common man and the middle-class are not affected by this tax hike,” said Mungantiwar.
The state government had scrapped LBT in 25 municipal corporation areas from August 1. However, the tax continued to be in force for 1,162 traders with a turnover above the Rs 50 crore limit.
“Petrol and diesel pump owners had complained that this lack of uniformity in rates had affected their business. Hence, we decided to scrap LBT on petrol and diesel in all 25 municipal corporations,” said Mungantiwar, adding the state would have to bear a burden of Rs 350 crore.
“However, despite scrapping LBT, the state should not be damaged financially and hence, we have decided to impose (an additional surcharge) of Rs 2 per litre on petrol and diesel,” he added.
Mungantiwar said the fall in petrol and diesel prices was leading to lesser VAT revenues for the state (as the tax rate is linked to the price of the fuel). The state is taking a hit of around Rs 1,800 crore i.e. Rs 300 crore per month.
“The LBT on liquor, cigarettes and soft drinks had been scrapped. However, since the farmer is in crisis, we have decided to increase the VAT on these by 5%,” said Mungantiwar, adding the VAT on diamonds, gold and ornaments would rise from 1% to 1.20%. “Those who have money for vices should be able to spend a few rupees more for the farmers,” he noted.
“(The increase will apply) till GST comes into force and in case if it does not happen, then we will do a rethink in the next budget if necessary,” Mungantiwar said, adding they would focus on purse tightening, streamlining purchases and proper utilisation of resources to make ends meet. The state cabinet will also meet in a month to discuss how departments can do this.
“Where there was a LBT of Rs 2.50 per litre, the petrol and diesel rates will fall by 50 paise; but if it was Rs 1.50 per litre, the rates will rise by 50 paise,” Mungantiwar said.
The fall in prices of these fuels has led to the tax per litre on diesel falling from Rs 13.01 in September 2014 to Rs 9.58 per month, a decrease of Rs 3.43. The reduction in taxes on petrol was Rs 2.11 per litre – from Rs 15.77 in September last year to Rs 13.66 for the corresponding month this year.
The tax rate on petrol and diesel in Maharashtra is 24% and 21% respectively, while in Mumbai it is 26% and 24%. However, Mungantiwar said this was lesser than states like Andhra (39.56%), Madhya Pradesh (32.30%), Rajasthan (32.68%), Punjab (36.38%), Karnataka (32.30%) and Kerala (34.24%).
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