Petrol, diesel to now get costlier in Punjab after hike in VAT

The Punjab Cabinet approved a hike in value-added tax (VAT) on petrol and diesel during a meeting chaired by Chief Minister Bhagwant Mann on Thursday. The VAT on petrol will increase by 61 paise per litre, while the tax on diesel will rise by 92 paise per litre.

Finance Minister Harpal Singh Cheema announced that the VAT increase is expected to boost revenue by Rs 395 crore from diesel and Rs 150 crore from petrol. The decision was made to enhance state revenue.

Cabinet meeting, Finance Minister Harpal Singh Cheema said the decision has been taken to raise VAT on petrol and diesel.

Check petrol prices in major Punjab cities today

Check diesel prices in major Punjab cities today

A quick explainer on VAT

Value-Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of production or distribution. It is a type of indirect tax, meaning it is collected by businesses on behalf of the government, rather than being paid directly by consumers. VAT is designed to be a transparent, multi-stage tax that is added incrementally at each step of the supply chain.

Here’s how VAT works: A business buys raw materials and pays VAT on those materials. When the business processes these materials into a product, it adds VAT to the selling price. The consumer then pays VAT when purchasing the final product. The business collects this VAT and remits it to the government, minus the VAT it has already paid on its inputs. This system ensures that VAT is only paid on the value added at each stage, rather than the total value of the product.

Earlier, in June, the Goa government increased VAT on petrol and diesel. The new VAT rates raised the price of petrol by Re 1 per litre and diesel by 36 paise per litre. With the VAT hike, the price of petrol in Goa will rise to Rs 95.40 per litre, while diesel will be priced at Rs 87.90 per litre.