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Note ban got Maharashtra govt an extra ?125cr from fuel VAT
January, 11th 2017

The sudden decommissioning of the Rs500 and Rs1,000 notes got the state government an unexpected, additional revenue of Rs125 crore — through the Value Added Tax (VAT) it earns on the sale of diesel and petrol.

Soon after the demonetisation announcement, the government allowed people to use the banned notes at petrol pumps. Desperate to get rid of the notes, motorists queued up. The highest sale of the fuel was witnessed in the first three days after the announcement. The more fuel that was sold, the more the VAT collected.Latest figures collated by the Sales Tax department show a 16% rise in the collection of VAT on petrol and diesel in November.

The monthly collection of VAT on fuel sale is usually Rs1,300 crore in the state. Discounting natural growth, the windfall from VAT on the sale rise was Rs125 crore in November. Maharashtra charges 26% VAT, with an additional cess of Rs6 a litre for petrol; it is 24% and a Rs2 cess on diesel.

“We saw a rise in VAT collections on fuel in November by 16%. We levy VAT at selling point by oil companies. After the sudden rise, sale dropped to its normal in the subsequent period,” said Rajiv Jalota, sales tax commissioner. “The sale rose at every cut-off date announced by the Centre. It has now come to normal, as the storage of fuel is not allowed and there were limitations on purchase of fuel for cashing old notes. We were warned by I-T department to not indulge in advance billing by accepting old notes,” said Uday Lodh, general secretary, Fampeda, an organisation of fuel dealers. Finance department officials said overall sales tax collection rose to Rs7,943 crore from Rs7,000 crore in November. In December, it fell to Rs6,758 crore.

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