Different Types of Taxes on Petrol in Maharashtra

(As of 26th Sep 2023)

The actual petrol price or the petrol price without tax in India is relatively lower than the retail selling price. This is because the tax imposed by the government on petrol is one of the crucial factors that have caused the price increase. Two types of taxes are imposed on the fuel price – excise duty and the state tax. While excise duty is constant for all states across India and is imposed by the Central Government, state tax includes sales tax and value-added tax (VAT), which may vary based on the rates levied by different state governments.

In May 2022, the central government announced a reduction in fuel tax, and thus, the current excise duty rate in Maharashtra on petrol and across all the other states came down to ₹19.90/L and covers 20% of the petrol price. The current VAT imposed by the Maharashtra government is 25% of (the fuel price charged to dealers + excise duty + average dealer commission).

For example,

If the retail selling price or the petrol rate in Maharashtra is 109.24, the following will be the significant details regarding tax in the state.

The petrol rate in Maharashtra typically depends on the following factors.

Demand and supply of the fuel: The market's most basic yet important price determination is the supply and demand model. With more and more individuals opting to purchase a vehicle, the demand for petrol and diesel has been increasing continuously. This increasing demand, however, cannot be matched by the existing crude supply. Thus, higher demand and lower supply lead to increased petrol rate prices.

Crude oil price: The oil refineries in India import crude oil from the international market. It is later processed into petrol or diesel. So, any change in the crude oil prices globally impacts the purchase price for India and puts pressure on the petrol prices in the country. The global crude oil prices depend on factors such as international politics, supply and demand model and future oil reserves.

Dealer's cost: The price charged to dealers comprises the base price set by the public sector oil marketing companies, which may include the freight and refining charges and other related expenses. An increase in this cost ultimately increases the petrol rate in Maharashtra.

Dealer's commission: These oil marketing companies, commonly called OMCs, pay the petrol pump owners a commission. Thus, a dealer's commission also impacts the tax on petrol in Maharashtra.

Centre's excise duty: The central government imposes a specific tax or duty on the fuel prices, called excise duty. As mentioned earlier, the excise duty charged by the central government on petrol is ₹19.90/L and covers 20% of the petrol price.

State's sales tax: Each state imposes its sales and VAT on the petrol price. The Maharashtra Government imposes VAT, charged over and above the base price and excise duty.

Value of Indian Rupee against US Dollar: the US Dollar (USD) is the most used currency in the world. Most of the international monetary transactions are routed through USD. When it comes to international transactions, foreign currency exchange plays a crucial role in determining the price. Since the foreign exchange rate keeps fluctuating, it impacts the value of India Rupees (INR) to the (USD). For example, if the USD strengthens or the value is high, India will have to pay more to purchase the same quantity of crude oil than if the USD weakens. Hence, rupee depreciation leads to a rise in fuel prices, and rupee appreciation leads to a fall in fuel prices.

The petrol prices in the country have remained high, with most of the state breaching the ₹100 mark. More individuals opting for cars has led to an increase in demand and, subsequently, fuel prices. The increase in car buyers has also increased the number of 4-wheeler insurance policies in the country.

However, it is always recommended to opt for comprehensive car insurance from a reputed insurer like Tata AIG. You can purchase a car policy online through Tata AIG, making the complete process swift and hassle-free. Moreover, you can compare, calculate premiums and enjoy other benefits at affordable rates.

What is the tax on petrol in Maharashtra?

The Maharashtra Government imposes VAT at 25% of (fuel price charged to dealers + excise duty + average dealer commission).

Is GST applicable on petrol prices?

Petrol products, including petrol, diesel, natural gas, etc., do not fall under the ambit of the GST regime; hence, GST is not applied to petrol prices.

Does the excise tax on petrol keep changing?

Excise tax on petrol is a predefined amount that the Central Government announces, hence remains constant.