In a move aimed at raising additional revenues, the Himachal government revised its earlier decision to raise value added tax on diesel to 9.60% and asked the excise department to draw up a proposal to increase VAT to 12% instead. On October 28 the cabinet approved a 1% hike in VAT on diesel from 9.60% to 10.60% but the measure was not notified. At the last cabinet meeting held on August 25, the excise department was told to revise the proposal to raise VAT to 12% which would make diesel costlier by one rupee.
Earlier, the government had targeted additional revenues of Rs 26 crore after the VAT increase, but now expects over Rs 60 crore in fresh revenues after the proposed 2.40% hike.
The excise department is now expected to issue a notification on the further hike in VAT on diesel. Currently diesel is sold at Rs 52.74 per litre in Himachal Pradesh.
Excise and taxation minister Prakash Chaudhary said VAT on diesel prices in neighbouring states was above 12% and, even after raising VAT further, it would remain lesser than in Haryana and Punjab. "Earlier it had been decided to hike VAT by 1% but now we are revising it and VAT will be up by 2.40%," he said.
The government in Haryana led by Manohar Lal Khattar increased VAT on diesel from 9.24 % to 12.07 %, raising the fuel's retail price by about Rs 1.15 per litre. Punjab had raised VAT on diesel by 1.5 per cent to 11.25 per cent with effect from November 15 and the state also levies a 10% surcharge on the price of the fuel inclusive of VAT.
Earlier on October 17 the Himachal government had raised VAT on petrol from 25% to 27% and the fuel now costs Rs. 68.83 a litre.