The cash-starved Maharashtra government on Wednesday decided to increase value added tax (VAT) on various products to deal with drought.

While the sales tax on petrol and diesel has been increased by ₹2 per litre, VAT levy on goods such as liquor, cigarettes and aerated drinks has been increased by 5 per cent. VAT on luxury items such as diamond, gold and the jewellery made out of these commodities has also been increased from 1 to 1.20 per cent. The new rates would be applicable from Thursday and will result in additional revenue of ₹1,600 crore over the next five months.

State Minister for Finance Sudhir Mungantiwar told mediapersons that the treasury has a deficit of ₹8,000 crore which has widened due to the earlier decision to scrap Local Body Tax. The failure of monsoon has also triggered huge demand for drought relief funds, he said. For untimely expenditure such as crop losses due to natural calamity ₹1,421 crore have been paid to the farmers. Provision for crop insurance has been ₹690 crore and for converting short-term farm loan into long-term ₹117 crore have been spent. About ₹1,000 crore is required for public distribution of wheat and rice under Food Security bill scheme.

The Minister justified the increase in VAT by saying that the higher taxes are not on essential commodities and food items but on petroleum products and gold.

“Chief Minister Devendra Fadnavis has asked all departments to make a list of how to generate more revenue and cut down on expenditure. We will have a special Cabinet meeting to discuss the same next month,” Mungantiwar said.

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