How can Goa manage to reduce petrol price by Rs.11?

I was amazed to read that Mr. Manohar Parrikar has promised to reduce the price of petrol in Goa by Rs. 11 and I was really curious to see how he managed this, and how big a hole this will put in the State’s finances.

The way he has managed this Rs. 11 reduction is by abolishing (almost) the VAT on petrol which used to be 20%. This is now only 0.1% and it has not been brought down to zero so as to maintain sales records.

The thing that amazed me most was that this step will not lead to a revenue loss but the Goa government is actually projecting an increased realization of Rs. 470 crores from VAT, Entertainment Tax, Luxury Tax, and Entry Tax!

The source of this information is the budget speech document (pdf) and I don’t know how far these projections have been accurate in the past but they have raised the rates on a whole host of other things in order to plug the loss from the reduction in VAT.

From the budget document, here are the things on which taxes have been increased.

Value Added Taxes

195 VAT on IMFL (Indian Made Foreign Liquor) and Beer to be increased from 20% to 22%.

196 VAT on Carbonated beverages (Coke, Pepsi etc.) increased from 12.5% to 20%.

197 VAT on junk food and fast food increased to 20%. (Not mentioned how much it was earlier)

198 Levy a tax rate of 15% on cars and SUVs sold at more than Rs. 15.00 lakhs. Same thing is applicable on bikes that cost more than Rs. 2 lakhs.

199 Levy 5% VAT on textile fabrics.

200 Entry tax on Naptha increased from 12.5% to 15%.

202 Tax on cigarettes increased to 22%.


Entertainment Tax

211 Entry fee on casinos reduced from Rs. 2,000 to Rs. 500 but the license fee increased to Rs. 6.5 crores – these two measures are expected to net themselves out.

213 Entertainment tax on casino games to be increased from 10% to 15%

Luxury Tax

214 Space being rented out for use of commercial activities to be brought under the ambit of luxury tax at the rate of 5%.

215 Services provided in a beauty parlor or spa to be covered under luxury tax of 10%.

Entry Tax

218 Raise the rate of entry tax on coal and coke to 2%.

219 Increase the rate of entry tax on SUVs and bikes which exceed Rs. 15 lakhs and Rs. 2 lakhs to 15%. I’m not quite sure whether this is in addition to the 15% VAT.

Conclusion

220 The effect of all this is that they expect to raise additional revenue by Rs. 470 crores.

Please note that this is not a complete list of all the items and I’ve excluded some other items like Gensets – the rates on which have also gone down. I’ve done that because I was primarily interested in seeing what rates they have increased to manage this extra Rs. 470 crores.

I must emphasize again that these are the only numbers I’ve seen, and this is the first time I’ve seen such a thing so it is possible that I may have missed an increase mentioned in the document which turns out to be quite important. Also, I’ve not seen the absolute numbers for any of these items as it was last year so it is hard for me to say how realistic this additional realization really is.

If you have any knowledge on that – fire away!

Reader Stories: Rohan Doshi’s Investing Journey

Rohan left a comment on the first post about investing for beginners about how much that post resonated with his experience, and I asked him if he’d be interested in sharing his story.

He responded to me last week, and here’s what he had to say (with minor editing).

First, a bit about me.

Age: 26 Years
Education: Computer Engineer
Current Job Role: Senior Software Engineer
IT Experience: 5 years 8 Months
Project: Derivatives Product Control
Marital Status: Married

Story :

Phase 1 Beginnings

I started my investment career when I joined HSBC on 24 July 2006, had a habit of investing minimum 10,000 every month since my 1st salary. I used to invest all that in stock market (I know it’s too bad to jump too early into this without much knowledge, but I really some how got attracted to it due to my gujju blood may be 🙂 )

I also did a 7 day stock market class in Pune for better understanding and gave 3-4 NCFM exams including derivatives one.

By the end of 2007  I had invested Rs. 3,30,000 in the stock market (including 50% mom’s amount) and total output value was Rs. 5,20,000.
Most of my investments were done based on my internet search / local broker tip / IPOs etc. It’s too bad that I didn’t sell anything at the time , because I had never heard of selling the stocks till then, and waited for them to go up , up and up 🙁

Phase 2 Bubble Burst

In Jan 2008 came the Reliance Power IPO with much hype, and I got carried away and filled 2 applications of 1 lakh and rest we all know 🙁

After that I didn’t invest in a single stock and as I said I was just witnessing all investments value getting reduced day by day.

I lost confidence in stock market at that time and got distracted from it for next 2 years or so.
I wasn’t even reading any financial articles or talking about it to my friends 🙂
It’s just that in 2010, stock market was on recovery mode and I also needed money for my marriage so I sold most of my investments.

Phase 3 Marriage

I got married in Dec 2010 and since then I felt the need to start investment again for my family’s secure future.

As I had already burned my hands in the 2008 crash, I was sure that I will not take that route. By now, I had realized that it’s not possible to concentrate on day trading till I do my day job.
So this time I decided to take mutual funds SIP route and started searching for good mutual funds with track records.

Around similar time (March 2011), I found out about your’s and Hemant’s blog through internet and got attracted to it.

Then I had gone through many of articles from both of your websites and got convinced that only mutual funds SIP is not sufficient and what I need is complete financial planning. But only thing that was stopping me from doing it was fees for financial planning. This financial planning concept is still very new in our country and to pay for the advice is something for which I was having hard time to convince myself.

Later around April 2011 , Hemant announced the scheme of complete financial planning in 10k and at that moment I decided that this is time I should go for it.

I called him and we had discussion about the current situation and my requirement. Within span of 2 months, we completed all the formalities and I shared maximum information about my financial life to him.

He had plan ready for me and once we agreed to it then we started the implementation on it since Jun 2011. I can say that it is very good plan made by him, catering to all my objectives. It covers retirement planning, goal planning (child education, child marriage, vacations, car purchase , insurance planning).
Also he divided all the goals into 3 categories like short term, medium term and long term for my better understanding.

So I am very happy with this phase right now and planning to continue in it for long long time.

About stock market, I still have fascination about buy/sell of stocks but I have decided to gain lot of knowledge about its nuances before i jump again and that too with amount which i can afford to loose.
Also currently I am also pursuing the MBA from ICFAI and into its last stage , its my company sponsored program and i have taken it to enhance my knowledge about finances.

So, this was my story starting diving deep in the market to taking a very planned approach. What do you think of it? Does it sound familiar to your story at all?