In general states increases the tax to generate more revenue. But the ploy misfired totally for Andhra Pradesh government. The state had increased VAT on petrol and diesel steeply. Instead of bringing additional revenue, the hike made the state to lose VAT.
commercial vehicles, especially diesel consumers since the hike preferred to buy their fuel from the neighbouring states of Karnataka, Tamil Nadu and Odisha. As a result, the state ended up losing VAT rather than net additional income.
The state had targeted additional income of 1300 Crore per year with the hike. After the price increase, the price of diesel is cheaper by Rs 5 per litre in Tamil Nadu, Rs 4 in Karnataka and Rs 3.50 in Odisha. It is said that those in Chittoor, Kurnool, Anantapur and Nellore are filling up their tanks in Karnataka and Tamil Nadu, the ones in Vizianagaram are doing so in Odisha. The volume of sale post the hike had decreased according to the official figures.
