Delhi became a costlier city to live in on Monday with state finance minister AK Walia raising taxes on almost all items, including LPG, diesel and CNG. The annual budget for the city has raised the value added tax to 20% from the current 12.5% to finance an additional spend of Rs1,100 crore, mainly to finance the Commonwealth Games. This means items ranging from high-end mobiles to utensils will now cost more.

The Rs 26,000-crore budget has allocated 16% of the revenue for improvement in the transport sector, again because of the Commonwealth Games, due in October. The sector has got Rs 4,224 crore, which will include purchase of 1,475 more low-floor buses for Rs 675 crore. Walia also announced the launch of a GPS-based vehicle-tracking system to make online bus information system operational.

The minister has withdrawn the Rs 40 subsidy on LPG cylinders and levied a 5% VAT on CNG, the fuel that drives the Capital?s public transportation.

VAT on diesel has risen to 20%, the fuel would now cost Rs 35.29 a litre in Delhi against Rs 32.92 now.

While presenting the 2010-11 budget in the state legislature, Walia explained there had been an increase in government?s expenditure in the last two years owing to the Commonwealth Games-related projects and schemes. “Our revenue collection through taxes has not been adequate due to recession. Therefore, it has become essential to look for measures to generate additional revenue to sustain development.?

The budget predictably got a thumbs-down from the main opposition party, the BJP, which walked out of the House. The VAT hike will cover items like desi ghee, household plastic items, kerosene stoves, wood, inverters, tea, coffee locks, lanterns, fertilisers and all utensils and cutlery items, including pressure cookers.

However, the finance minster claimed there was a cushion of softer prices in the Capital, which will moderate the impact. He said retail prices of food items in Delhi were the lowest compared with Mumbai and Chennai. He said against an increase of 12% in Mumbai and 15% in Chennai, the Capital has registered an escalation in prices by just 11.3%. He also noted there was a 6.85% increase in tax collection compared to the last fiscal.

“The current year’s revised target of tax revenue is Rs 13,174 crore, which is 8% higher than the previous year. Next year’s target tax revenue is Rs 15,582.50 crore, with a growth of about 18% over the current year,” he said.