State-wise Tax on Petrol and Diesel in India

The rising prices of petrol and diesel impact people in several ways. The initial impact of this hike is felt by people who own personal vehicles, especially those who use their cars or two-wheelers for daily commuting. Their monthly fuel expenses tend to increase and in turn, disrupt their monthly budget. As a result, they might have to cut down on other expenses to compensate for the hiked fuel prices.

Now, let’s talk about the indirect impact of the fuel price hike. As fuel prices go up, sales of cars and two-wheelers usually go down. This contraction in demand affects the automobile industry adversely. Apart from this, the rising fuel prices have a cascading effect on businesses belonging to various sectors. It’s because the cost of transportation and logistics starts to increase and therefore, their overhead costs for buying raw materials go up. As a result, their profit margins get reduced.

Consumers also face the burden of rising fuel prices as it causes the inflation rate to go up and hence, the prices of daily-use commodities – such as vegetables, oil, plastic, rubber, etc. – start going northwards.

At the time of writing this blog, the price of petrol in India is hovering around ₹100 in almost all major cities, including Delhi, Kolkata, Mumbai, Bengaluru, Chennai, and Hyderabad.

As of the 23rd of June 2022, petrol is trading at ₹96.72 per litre in New Delhi, ₹111.35 in Mumbai, ₹106.03 in Kolkata, ₹101.94 in Bengaluru, ₹102.63 in Chennai, and ₹109.66 in Hyderabad.

At the same time, diesel prices in India as of the 23rd of June 2022 stand at ₹89.62 per litre in New Delhi, ₹97.28 in Mumbai, ₹92.76 in Kolkata, ₹87.89 in Bengaluru, and ₹97.82 in Hyderabad.

To get fuel at cheaper rates, many people travel some extra miles to cross state borders and purchase fuel from the neighbouring state(s). Some reports have even indicated that a few people are trying to smuggle cheap petrol from neighbouring countries in an illegal manner.

As you can see, there are big differences between the petrol and diesel prices in different states of India. At present, petrol is available at the cheapest rate in India in Port Blair at ₹91.45 per litre. On the other hand, it is most expensive in Parbhani in Maharashtra at ₹123.47 per litre. The difference between the two prices is a hefty ₹32 per litre.

So, you might be wondering what can be the reason behind such sharp variations in fuel prices in different parts of India. To understand the reason behind this, you will need to first understand the price structure of petrol and diesel in India.

The fuel pricing structure in India mainly comprises four major charges:

• The base price of the fuel
• Dealer’s charges and commissions
• Excise Duty, and
• Value Added Tax (VAT)

While the base price and dealer’s profits remain the same all across India, it is the diesel and petrol tax in India (excise duty + VAT) that creates variations in fuel prices in different states. The fuel tax in India can further be divided into state tax and central tax.

It should be noted that the adverse geopolitical situation has a significant role to play in the astounding rise in the fuel price, but the state-wise tax on petrol in India, as well as on diesel, also took the price a few notches higher.

As mentioned, both States and the Central Government levy taxes on petrol and diesel in India. These taxes constitute around 55% of the total retail price of these fuels. However, taxes on petrol and diesel in India vary with each state. It’s because different states levy different sales taxes or Value-Added Taxes (VAT).

Below is a list of state-wise taxes on petrol and diesel in India:

We’ve simplified the tax structure levied by Governments on petrol and diesel. It is crucial to note that the central and state tax on petrol in India keeps on changing from time to time. It’s because Governments revise their tax structure on fuels to maintain their revenues and decrease the pressure on consumers.

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