Andhra Pradesh not likely to reduce VAT on fuel due to financial condition

Opposition parties have warned of agitations if the YSRCP government doesn’t announce tax cuts on fuel soon.
Andhra Pradesh Chief Minister Jagan Mohan Reddy
Andhra Pradesh Chief Minister Jagan Mohan Reddy
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The Andhra Pradesh government is not inclined to effect any cut in Value Added Tax on petrol and diesel due to its precarious financial condition, a top official told PTI on Friday, November 5. Two days ago, the Union government reduced the Excise Duty on petrol and diesel by Rs 5 and Rs 10 a litre respectively and asked the states to cut VAT to give more relief to consumers. Consequently, petrol price fell from Rs 115 to about Rs 110 a litre and that of diesel from Rs 107 to about Rs 97. Many states have followed the Union government’s advice and reduced VAT.

"We have not taken any decision on the issue yet, but it is highly unlikely that we will effect any reduction in VAT. Our precarious financial condition does not permit it," the official, who did not wish to be named, said. Andhra Pradesh is among the states with highest fuel rates in south India. 

On July 20 last year, the state government revised the tax structure on petrol and diesel, thereby increasing their price by Rs 1.24 and Rs 0.93 per litre respectively, to mop up an additional revenue of about Rs 600 crore per annum. Subsequently, a road development cess of Rs 1 per litre each on petrol and diesel was levied for an additional revenue generation of Rs 600 crore.

The government is now seeking to escrow the road development cess revenue to secure over Rs 2,000 crore loan from banks, while money has reportedly not been spent on road development works so far. "Forget about development, not a kilometre length of road has been repaired in the state in the last two years," Jana Sena Party Political Affairs Committee Chairman Nadendla Manohar alleged. He wondered what happened to the hundreds of crores of rupees collected by the government in the name of road development cess, besides additional taxes on fuel.

He regretted that people were forced to bear the additional financial burden in the name of cess and VAT, "despite there being no development." "The Jagan Mohan Reddy government should tell the people to what extent it will reduce VAT on petrol and diesel, like the other states. Otherwise, we will expose the government," Manohar warned in a statement.

Andhra Pradesh Congress Committee president S Sailajanath too demanded that the state government immediately reduce VAT on petrol and diesel and mitigate the burden on people. "We will take up an agitation if the government fails to follow other states and reduce VAT,” he said.

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