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.
Incidentally, the Congress-led Government in Punjab on Sunday announced a reduction in Value Added Tax (VAT) on petrol and diesel, making them cheaper by 10 and5 per litre respectively in the State. The new rates will be effective from midnight. Currently, petrol and diesel rates in Punjab are 106.20 and89.83 per litre respectively.
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 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. This, after the5 per litre reduction in excise duty, has come down to 50 per cent in Delhi. Two dozen 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. Similarly, on diesel, the central excise duty of 31.80 per litre and 16.75 per cent of VAT plus air ambience charges of250 per kilolitre, brought the total incidence of taxation in Delhi to 48 per cent.
This, after the `10 a litre cut in excise duty, has come down to 40 per cent in Delhi. In cases that have cut VAT, the incidence will be even lower.
Basic price, which includes the cost of oil plus freight, varies between 52.01 a litre in Chennai to59.89 in Ladakh. On top of this, the central government charges an excise duty of 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 of30.51 a litre, followed by Maharashtra with 29.99, Andhra Pradesh (29.02) and Madhya Pradesh (`26.87). The lowest VAT of
4.93 a litre is levied in Andaman & Nicobar. Similarly, the basic price of diesel varies from52.13 a litre in Chennai to 59.57 in Ladakh. On top of this, the central government charges an excise duty of `21.80.
The highest VAT of 21.19 a litre is levied in Andhra Pradesh, followed by21.14 in Rajasthan and 20.21 in Maharashtra. Himachal Pradesh levies the lowest VAT of4.40 a litre, and Andaman & Nicobar charges
4.58. Petrol pump dealers are paid3.85 per litre commission on petrol and Rs 2.58 on diesel. Petrol prices have been further reduced by as much as 8.7 per litre and diesel 9.52 in BJP-ruled states and Union Territories – from Ladakh to Puducherry – after they matched the central government’s announcement of a cut in excise duty with slashing of VAT.
Buckling under pressure, the Union government had last week cut excise duty on petrol by 5 per litre and that on diesel by10 a litre to give reprieve to consumers battered by record-high retail fuel prices.