Petrol @100: How much do you shell out in taxes and which state charges the highest?

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Petrol price has again hit the three-figure mark in the country, rising for the fifteenth time this month.

In Mumbai, a litre of petrol on May 29 was available for Rs 100.19 while diesel was retailing at Rs 92.17 a litre.

The taxes levied by the central and state governments on petrol and diesel play a major part in determining auto fuel prices.

Central and state taxes make up for 60% of the retail selling price of petrol and over 54% of diesel.

Besides taxes, in India, the price of petrol and diesel you pay at the pump is dependent on international product prices, rupee-dollar exchange rate and other factors like dealer margin and freight charges. Petrol and diesel do not come under the purview of goods and services tax (GST).

Tax structure of retail price of petrol

For example, in Delhi, petrol is available today at Rs 93.94 a litre.  The oil itself is priced at Rs 35.56 a litre. The rest is taxes, duty and dealer’s commission. The freight levy is fixed at Rs 0.36. The dealers pay Rs 34.55 of petrol in the Capital. This price does not include excise duty or VAT.

The excise duty levied on petrol is Rs 32.89. The dealer commission is Rs 3.77 a litre in Delhi. On this, a further VAT of Rs 21.36 is being added. The retail price is arrived at after adding all these components.

Tax structure of retail price of diesel

The retail price of diesel is Rs 84.89 a litre in Delhi. The base price is fixed at Rs 37.99. With a freight levy of Rs 0.33, the price charged to the dealer comes at Rs 38.32. Then, add an excise duty of Rs 31.80 on it. The dealer’s commission on diesel is Rs 2.58 in Delhi. A further VAT of Rs 12.19 is being added to it.

Since almost 60-70% of the end cost of petrol and diesel are taxes and other charges, only 30-40 per cent of the oil component in India is linked to the benchmark prices of crude oil in international markets.

States with highest taxes

The price of fuel varies from state to state depending on local taxes such as VAT and freight charges. Rajasthan has the highest value-added tax (VAT) on petrol in the country, followed by Madhya Pradesh.

In Rajasthan, VAT on petrol 36% plus Rs 1.5 per litre road cess is still the highest in the country. On diesel, the state levies 26% and Rs 1.75 a litre road cess. Sri Ganganagar district of Rajasthan has the costliest petrol and diesel in the country at Rs 104.97 a litre and Rs 97.79 a litre, respectively.

While Madhya Pradesh levies 33% plus Rs 4.5 a litre and 1% cess on petrol. On diesel, it charges 23% plus Rs 3 a litre and Re 1 cess.

After Rajasthan and Madhya Pradesh, Manipur imposes the biggest VAT of 36.50% on petrol, and 22.50% on diesel while Andhra Pradesh has imposed VAT by 31% and 22.25% on petrol and diesel respectively.

Among the states that impose a lower VAT are Punjab by 24.79% and Chhattisgarh by 25%, and Maharashtra charges 25% VAT on Petrol.

Revenue

According to a report, in March 2021, the central government’s tax collections on petrol and diesel jumped over 300% in the last six years. Together with excise duty on natural gas, the central government in 2014-15 collected Rs 74,158 crore which has gone up to Rs 2.95 lakh crore in April 2020 to January 2021 period.

Taxes collected on petrol, diesel and natural gas as a percentage of total revenue have gone up from 5.4% in 2014-15 to 12.2% in the 2020-21 fiscal.

According to reports, the cost of diesel is estimated to make up around two-thirds of the transportation cost. Rising oil prices affect people on multiple fronts. But petrol and diesel have been an important source of earning for the government in these Covid-19 times when other sources dried up.