Successive hikes in taxes on petrol and diesel in 2020 increases India’s excise duty collection by 48%

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While the pandemic stifled tax collections across the country, India’s excise duty mop-up jumped by 48 per cent in the current fiscal on the back of a record increase in taxes on petrol and diesel. It more than made up for the below-normal fuel sales during the lockdowns.

Excise duty collection during April-November 2020, was at Rs 1,96,342 crore, up from Rs 1,32,899 crore mop-up during the same period in 2019, according to data from the Controller General of Accounts (CGA). This was despite the fact that over 10 million tonnes less diesel – the most used fuel in the country – was sold during the eight months period.

Diesel sales during April-November 2020, stood at 44.9 million tonnes as compared to 55.4 million tonnes a year back, according to data from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).

Petrol consumption too was lower at 17.4 million tonnes, compared to 20.4 million tonnes during April-November 2019. While Goods and Services Tax (GST) apply on most products since its introduction in 2017, oil products and natural gas has been kept out of its preview. Excise duty, which accrues to the centre, and VAT that goes to the state government, are levied on their sale.

The government had raised excise duty on petrol by Rs 13 per litre and that on diesel by Rs 16 a litre in two tranches to mop up gains arising from international crude oil prices falling to a two-decade low. With this, the total incidence of excise duty on petrol rose to Rs 32.98 per litre and that on diesel to Rs 31.83 a litre.

In full 2019-20 fiscal (April 2019 to March 2020), excise collection totalled Rs 2,39,599 crore, according to CGA. Central excise duty makes up for 39 per cent of petrol and 42.5 per cent of diesel. After considering local sales tax or VAT, the total tax incidence in the price is about two-third of the retail rate. In total, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17, from Rs 99,000 crore in 2014-15.

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