However, the Opposition has demanded to roll back the decision.
Tripura had been suffering from the loss of more than Rs 1000 crore at the beginning of financial year 2011-12 due to awarding of less funds by 13th Finance Commission (FC) as compared to the state’s demand, a government report said.
The state government is facing a serious financial crisis, which is reflecting upon the welfare and developmental activities.
According to officials' estimate the state would be able to earn an additional revenue of Rs 55 crore with the hike of fuel price that would increase the internal revenue to Rs 598 Cr, which was Rs 470 Cr in last fiscal.
State Finance Minister Badal Choudhury said the enhancement of VAT on essential commodities and immediate hiking of price of petrol and diesel was recommended by the National Empowered Committee of Finance a few months ago but Tripura implemented it a little late just to cover up the budget deficit of Rs 246 Cr this year.
Mr Choudhury pointed out that the Empowered Committee on Finance chaired by West Bengal Finance Minister Asim Dasgupta laid down a set of recommendations which made rise of one per cent price in all commodities mandatory and accordingly, VAT would be 2 per cent, 5 per cent and 13.5 per cent against existing one per cent, four per cent and 12.5 per cent.
"The Government of India had advised the states to increase the VAT rates from 4 per cent to 5 per cent to recoup compensation loss.
Most of the other states have already increased the rate in 2009-2010 and Tripura is one of the last states to increase the rates", he claimed.
Meanwhile, leader of the opposition Ratan Lal Nath alleged that the state government had miserably failed to manage the finance because of over dependency on bureaucracy.
He termed the decision ‘illegal’ and demanded to reconsider it.
The state government had failed to convince the FC and rather presented miscalculation, as a result, they were paid less, Mr Nath said.
"The fiscal management in Tripura has failed and the state government is now blaming the Centre for their misdeed," he said, adding the government could not release the Dearness Allowances and increment of its employees over past six month and now they were planning to increase VAT.