By Bizodisha Bureau, Bhubaneswar, January 5, 2015 : In a bid to mop up additional revenue, Odisha on Tuesday hiked the value added tax (VAT) on diesel and petrol prices by three percent making these petroleum products dearer taking the tax from existing 23 percent to 26 percent.

The state is expected to generate Rs 90 crore in the next three months in the current fiscal and Rs 361 crore per annum.

Petrol and diesel across the state will now cost more by Rs 1.39 per litre and Rs 1.14 per litre respectively.

“By increasing the VAT by 3 percent on petrol and diesel, the state government will get additional revenue of Rs.361 crore per year. It would get Rs.90 crore additional revenue in the next three months during the current fiscal,” said state Finance Minister Pradip Kumar Amat.

The Cabinet had approved a proposal to increase the VAT on diesel and petrol on December 31 authorising the finance department to enhance VAT rate on petrol and diesel.

However, the opposition parties have demanded an immediate rollback of the new VAT rate hike on fuel.

“There seems to be a competition between the Centre and state government to impose tax on the people. The increase in VAT on the fuel will adversely affect people. It will encourage price rise of many essential commodities. We demand a rollback,” OPCC President Prasad Harichandan said.

Demanding rollback of new VAT rate hike, Bharatiya Janata Party’s legislative party leader, Basant Panda, said: “The state government’s decision implies that it does not bother about the plight of the people in the state. We condemn it.”

Notably, there has been decline in the revenue from petrol and diesel due to gradual fall in the price of crude oil in the international market and deregulation of prices. This has affected the VAT collection adversely prompting the state government to increase the rate by 3 percent.

Odisha lost about Rs 417 crore revenue towards VAT and Entry Tax on petrol, diesel in the last fiscal, which prompted the state government decided to increase VAT on these products to recover the revenue loss, officials said.