Chandigarh: Punjab and Haryana raised Value Added Tax (VAT) on diesel, negating the full benefit of Rs 2 per litre cut on fuel to consumers.
The step has triggered sharp criticism from the farming sector of both states.
While SAD-BJP led government hiked VAT on diesel to 13.4 percent, the neighbouring BJP government in Haryana jacked up the tax to 16.4 percent.
After adding local levies like cess and surcharge, the effective rate of tax on diesel in the two states will be 17.29 percent and 17.22 percent respectively.
The VAT on diesel has been hiked from 11.5 percent (with surcharge 12.07 percent) to 16.4 percent, a senior official of Haryana Excise and Taxation Department said Thursday.
"VAT on diesel in Punjab has been raised from 11.25 percent to 13.4 percent. If we include cess (Rs 1 per litre) and surcharge (10 per cent on VAT), the effective tax becomes 17.29 percent," a senior official of Punjab Excise and Taxation department said.
After factoring in hike in tax and Rs 2 per litre cut in fuel by oil marketing companies, retail rate of diesel in Punjab dropped by Rs 1.25 per litre while in Haryana the price remains almost the same, dealers said.
The diesel rate in Punjab now prevails at Rs 50.41 a litre as against Rs 51.66 per litre before increase in tax. In Haryana, the new rate is Rs 50.10 per litre as against Rs 50.14 a litre, yesterday.
Notably, prices of petrol and diesel were yesterday cut by Rs 2 per litre by the oil companies.
The move comes in the wake of New Delhi, Punjab, Haryana, Himachal Pradesh and Chandigarh deciding to rationalise present tax regime by implementing a uniform tax structure (UTS) with view to eliminate tax evasion and curb smuggling of goods through state borders.
However, fuel pump owners pointed out that unless UT Chandigarh raises tax on diesel, the full advantage of uniformity in tax regime among northern states would not accrue.
Punjab Petroleum Dealers' Association President J P Khanna said that VAT on diesel in Chandigarh and petrol in Punjab should be brought down in order to bring uniformity in retail rates.
Chandigarh has lowest VAT on diesel among northern states at 9.68 percent and new retail rate is Rs 47.60 a litre.
Meanwhile, farmers of Punjab and Haryana have described hike in tax on diesel as an "anti-farmer" move, saying it will further lead to increase in their input cost.
"This decision will cause increase in input cost for farmers as 40 percent diesel in Punjab is used in farm sector," Bhartiya Kisan Union (Rajewal) President Balbir Singh Rajewal said.
"Farmers will be forced to absorb this additional cost themselves as they could not pass it on to anyone unlike in other sectors like bus or truck operators who pass on additional cost to consumers," he said.