Madhya Pradesh, Rajasthan charge the highest tax on petrol, diesel: Puri

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Madhya Pradesh and Rajasthan are the two states which levy the highest sales tax or VAT on petrol and diesel in the country, oil minister Hardeep Singh Puri told the Lok Sabha on Monday.  Prices of both petrol and diesel have shot to the highest this month. The central and state taxes make up about 55% of the retail price of petrol and 50% of diesel.

How VAT is calculated

While the central government levies a fixed excise duty of Rs 32.90 per litre on petrol and Rs 31.80 per litre on diesel, the states charge VAT as a percentage of oil price. So, when the oil price rises, so does the state tax. Once the price falls, the tax also falls.

“The excise duty or cess collected by the Central government from petrol was Rs 1,01,598 crore and from diesel was Rs 2,33,296 crore during the financial year ending  March 31, 2021,” Puri said in a statement.

He further added that state governments levy VAT on the total of base price and the taxes charged by the central government. Madhya Pradesh levies Rs 31.55 per litre VAT on petrol, which is the highest in the country. While Rajasthan charges Rs 21.82 per litre on diesel the highest when it comes to diesel, the minister said.

Rajasthan levies Rs 29.88 per litre VAT on petrol. In the case of diesel, Madhya Pradesh levies Rs 21.68 as VAT. The lowest VAT on petrol and diesel is in Andaman and Nicobar Islands at Rs 4.82 per litre and Rs 4.74 a litre, respectively.

The petrol’s retail selling price of Rs 101.54 per litre in Delhi is constituted of Rs 32.90 per litre as central excise duty and Rs 23.43 as state VAT. In the case of diesel, Rs 31.80 per litre is the central excise duty and Rs 13.14 is the state VAT in the final retail selling price of Rs 89.87.

Puri said the revenue generated by such taxes is used for various developmental schemes of the government like road-building scheme Pradhan Mantri Gram Sadak Yojana (PMGSY), free LPG connection programme Pradhan Mantri Ujjawala Yojana (PMUY), Ayushman Bharat and Pradhan Mantri Garib Kalyan Yojana (PMGKY).

“It is also used to provide relief to the poor during pandemic through schemes like Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) under which free ration was provided to 80 crore beneficiaries during April 2020 to November 2020 and May-June 2021, etc,” Puri added.