The total incidence of taxes on petrol has come down to 50 per cent and that on diesel to 40 per cent following a reduction in excise duty by the central government, and by a slightly higher proportion in states that have also cut local sales tax or VAT on the fuel.
In BJP-ruled states and Union Territories (UTs) — from Ladakh to Puducherry — Petrol prices have been further reduced by as much as Rs 8.7 per litre and diesel Rs 9.52 after the states matched the central government’s announcement of a cut in excise duty with slashing of state-level VAT. Almost 22 states and UTs have matched the central government’s excise cuts with a VAT reduction. And, in those states, the percentage of taxes in retail price will be marginally lower. Delhi has not yet lowered the VAT.
The retail price of petrol and diesel is decided after adding central excise, commission paid to dealers and value-added tax (VAT) to basic oil prices. The basic oil price is the prevailing international benchmark rate plus freight.
On November 1, prior to the duty cuts, central excise of Rs 32.90 a litre and VAT of 30 per cent in Delhi made up for 54 per cent of the retail selling price of diesel, according to price build-up of the fuel available from state-owned fuel retailers.
Basic price, which includes the cost of oil plus freight, varies between Rs 52.01 a litre in Chennai to Rs 59.89 in Ladakh. On top of this, the central government charges an excise duty of Rs 27.90 which is paid at the factory gate (refinery in this case). Thereafter, the state governments levy different rates of local sales tax or VAT.
Rajasthan has the highest VAT on petrol of Rs 30.51 a litre, followed by Maharashtra with Rs 29.99, Andhra Pradesh (Rs 29.02) and Madhya Pradesh (Rs 26.87). The lowest VAT of Rs 4.93 a litre is levied in Andaman & Nicobar. Petrol pump dealers are paid Rs 3.85 per litre commission on petrol and Rs 2.58 on diesel.