Delhi and other cities paying 63% tax to the central govt for a litre of petrol

Delhi and Kolkata became the latest entrants in the league of cities where a litre of petrol now costs ₹100 or more. Oil marketing companies increased the pricing of motor fuels on Wednesday after a day of pause. Petrol became pricier by 35 paise, while diesel became costlier by 17 paise.

Delhites and Kolkatans now pay ₹100.21 and ₹100.23 respectively for a litre of petrol. Do you know how much money you are paying as tax for a litre of petrol in these cities?

₹32.90 of the total amount goes to the central government coffer, while the state government is charging nearly ₹19.27 tax to fuel buyers. This means central government tax is nearly 63% of total taxes fuel consumers are paying while buying petrol. It also means that if the entire tax amount is withdrawn, petrol will be sold at a price less than half the current retail price.

In the case of diesel, the central government charges a tax of ₹31.80 and the state tax is ₹13.08. For diesel too, the taxes contribute around 45% of the final retail price.

While many blame it on the international crude prices for making petrol and diesel prices burning in India, the actual reason behind this is the high rate of taxes imposed by both central and state governments.

The pricing of motor fuels like petrol and diesel comprises several components. These include freight charges, excise duty, Value Added Tax or VAT, dealer commission etc. Fluctuations in international crude oil prices and foreign exchange rates too impact the retail price of petrol and diesel.

According to oil industry experts and economists, the central government has room to reduce the tax by at least over ₹4, without impacting the revenue majorly. Such a reduction would definitely bring much-awaited relief to the people.

The spiralling oil prices are not only hitting hard the motorists, but non-motorists as well. Diesel is the main fuel for the transporting sector and trucking industry. With diesel prices too shooting upward almost regularly, transportation cost is increasing. This is resulting in high prices for the consumables and non-consumables as well.

Bringing motor fuel prices under the ambit of GST too could bring a bit of relief. This would bring parity in fuel prices across the country by introducing a single tax structure across India.

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