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

by Manshu on March 27, 2012

in Articles

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!

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{ 8 comments… read them below or add one }

biju george March 27, 2012 at 3:04 pm

Well it seems boozing ain’t gonna be cheaper anymore in Goa. I wonder whether tourist industry would take a hit by this bold step. May be GORAs would prefer filling up their byke tanks with more petrol and cruise around rather than filling up their tummies with more beer and lazy around… :-D

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Manshu March 27, 2012 at 4:28 pm

Booze isn’t becoming so expensive though- just a 2% points up – this alone will probably not affect consumption much :-)

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Rajesh Narayanan March 27, 2012 at 3:42 pm

I guess, other states would take a cue from Goa and reduce the petrol prices, if they would like to attract votes in the forthcoming general elections.

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Manshu March 27, 2012 at 4:27 pm

I’m sure others are going to face the heat over this – and especially states where the Congress rules.

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harinee March 28, 2012 at 11:15 am

Hi
At least the Goa govt is trying to be more creative so full credit for that.Its good to see State govts really showing initiative nowadays where centre has failed.Time taxation laws change in India similar to US where you know where your tax money goes.n US I would know my State/County tax there goes to my local public school/library/county and will move districts if I am not getting value for money.In fact your taxation increases based on the quality of the schools in the district/the crime rate.
Slightly off-topic! Anything on GAAR and P-Notes please. Seems to be right direction but will this affect markets long term. Looks like redness is here to stay!

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Umesh March 28, 2012 at 2:17 pm

Many may not know that, roughly, out of total cost of petrol, around 50% accounts for various taxes, (central/state/local taxes). Most states charge 20 to >30% as VAT on petrol.

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drshetti March 29, 2012 at 6:57 pm

intresting question : how can goa manage to reduce petrol!

simple answer Petrol should cost us not more than 40 rs but our gove SUCKS blood of indian citizens oh no AAM ADAMI and in return gives PETROL! by charging anything around 25 t0 32 rs by central/ state taxes and excise !

PARIKAR OF GOA IS A FOOLISH POLITICIAN WH O DOSENT BELIEVE IN SUCKING BLOOD OF AAM ADMI

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Shishir May 31, 2012 at 3:13 pm

Great Work by GOA !!!!!
Other states should follow where people can get actaul benefit through it. Any way these politicians are happy in filling their pockets with black money. Only God knows about the loss of Public property due to “31st May Bharat Band”, which could have been saved by some proper planning. Here politicians are more interested in misguiding public by false statements.

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