Starting Tuesday, petrol and diesel prices in Uttar Pradesh will go up by Rs 2.5 and Re 1, respectively, after an increase in VAT (value added tax) by the state government. VAT on petrol in the state has been increased to 26.80 per cent or Rs 16.74 per litre (whichever is higher) and 17.48 percent or Rs 9.41 per litre (whichever is higher) on diesel, according to an official order.

A senior government official told PTI that the decision will fetch the state exchequer an additional income of Rs 3,000 crore annually and the money will be used on developmental projects.

Petrol and diesel have remained outside the purview of GST (goods and service) along with some other petroleum products for over 2 years now. The 'one-nation-one-tax' regime, that was implemented on 1 July 2017, did not include these fuels over fears of loss of revenue by state governments.

Taxes on fuel have been one of the biggest sources of revenue for states as well as the central government.