The overall tax on petrol has dropped down to 50 per cent and 40 per cent for diesel. This happened after the central government reduced the excise duty and the local VAT sales were cut by some states.
The total price of the fuel is decided after VAT and central excise is added to the basic oil prices. The basic oil price is set based on the international benchmark rate plus freight. On November 1, with excise duty cuts, the central excise of Rs 32.90/litre and VAT – 30% in Delhi took up to 54% of the total price of diesel. With a further Rs 5 reduction on excise duty, the price went down to 50% for petrol.
Two dozen states and UTs have obeyed the central government’s decision and also reduced VAT. In those states, the percentage of taxes is low. Delhi has not yet reduced the VAT for the fuels
Similarly, for diesel, the central excise duty of Rs 31.8/per litre and 16.75% VAT and air ambience rates of Rs 250/kilolitre bought down the cost of taxation to 48 % in Delhi. With a higher cut in excise duty, the total incidence of taxes will be lower than before.
Petrol pumps are paid a commission of Rs 3.85/litre for petrol and Rs. 2.58/litre for diesel.
The fuel prices have been reduced to Rs 8.7/litre and Rs 9.52/litre for petrol and diesel respectively in the BJP ruled states and Union territories after the excise duty cut and the VAT tax cut. Union territories like Ladakh and Puducherry are also included in it.
With increasing prices of petrol, the central government was under immense pressure. However, they came with a decision to cut excise duty on petrol by Rs 5/litre and Rs 10/litre on diesel that costs the government around Rs 45,000 crores.
The cut on excise duty has come as a great relief as the fuel prices have been reaching exorbitant prices for the past few months. The middle-class people have been suffering in this hiatus and the central government’s decision is implemented in maximum number of states but not all. States that are not led by BJP have different requests that they have made to the central government and until then the excise duty is yet to be reduced from the retail price of petrol and diesel in some states of the country.
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