Drought tax: Maharashtra govt hikes VAT on fuel, liquor, gold

Oct 01, 2015, 11:00 IST | Dharmendra Jore

Petrol, diesel, liquor, cigarettes, diamonds, gold to cost more from today; the state is expecting to raise Rs 1,600 crore in the next five months from the tax, which will be used to help drought-affected regions in the state

You will pay 5 per cent more for your favourite drinks and cigarettes and also pay Rs 2 extra per litre for buying fuel for your vehicle from today, thanks to a ‘drought tax’ imposed by the state government. The state cabinet approved a decision to this effect on Wednesday. It also decided to ask the people to pay 0.2 per cent more to buy gold, diamonds and jewellery.

Experts in Mantralaya said that this was a one-of-a-kind move by the BJP-led government because tax rates were always revised in annual budgets. From today, aerated drinks too will cost 5 per cent more, said Finance and Planning Minister, Sudhir Mungantiwar.

He said the state was expecting to raise Rs 1,600 crore in the next five months from the drought tax, after which these taxes will be rationalised in tune with the goods and services tax (GST) in the next annual budget“The people of Maharashtra are generous. We are confident that they will welcome the decision and help their brethren in distressed areas,” said Mungantiwar after the cabinet meeting.

The minister said that a surcharge of Rs 2 per litre on fuel would help the state compensate for a monthly loss of R300 crore that it would have suffered because of the scrapping of local body tax (LBT). “Today, the cabinet also decided to scrap the LBT on fuel in municipal areas,” he said.

People, opposition slam government
The decision did not go well with citizens, especially because it was taken ahead of a festival season. “We understand the plight of the farmers, but the government should not burden people like us who are fighting inflation these days. Costly fuel would add to transport costs which will be passed on to end consumers like us,” said RT Pawar, 47, a resident of Sion.

The Congress slammed the BJP for taxing people and accused it of raising funds for celebrating its one year in power. “The BJP government needs more money to publicise its so-called achievements. This is the same government that denied loan waiver to indebted farmers,” said Congressman and opposition leader in the legislative assembly, Radhakrishna Vikhe Patil.

Sources said the state government was mulling the drought tax since this year’s annual budget was presented. The finance minister and CM Devendra Fadnavis had also spoken about it. Parts of Vidarbha and western Maharashtra and entire Marathwada (central Maharashtra) are reeling under acute drought this year.

The government has started many short-term and long-term initiatives to mitigate the drought situation. Suicides of distressed farmers have also increased in the past 10 months. The state government said in a statement that the LBT on petrol and diesel was scrapped recently. The LBT for traders with an annual turnover less than Rs 50 crore has also been scrapped.

“Since this reduction had resulted in decreasing the cost of luxury items like liquor, cigarette and aerated drinks, we have decided to increase taxes on these items and also impose a surcharge on petrol and diesel,” said the statement, adding that the tax on gold and diamond jewellery has been increased from 1 per cent to 1.20 per cent.

It further said that due to the decreased fuel prices (in view of the global crude market) the state has been incurring a loss of R300 crore per month. It maintained that the state’s tax rate on petrol and diesel was less than other states like Andhra Pradesh, Madhya Pradesh, Rajasthan, Punjab, Karnataka and Kerala.

What goes up...
Surcharge on petrol and diesel: Rs 2/litre
More tax (VAT) on liquor, cigarette, aerated drinks: 5%
Extra VAT on gold, diamond and jewellery: 0.2%

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