Petrol Price In India Today (8th October 2024)

Taxes That Impact Petrol Prices In India

In India, the taxation structure on petrol is a significant determinant of its retail price. In India, petrol tax accounts for 55 per cent of the retail price of petrol. Apart from central excise duty and state VAT (Value Added Tax), there are other taxes that impact petrol prices. Road Cess: Road cess is an additional levy imposed by the central government on petrol to fund infrastructure projects, especially those related to highways and road development. Additional State Levies: Some states impose additional levies or surcharges on petrol prices beyond the standard VAT. These levies can vary based on local fiscal policies and economic conditions. Goods and Services Tax (GST): While petrol and diesel are currently not under GST, discussions periodically arise about bringing these fuels under the GST regime. This move could potentially simplify the tax structure and reduce price disparities across states. Local Body Taxes: Certain municipal corporations or local bodies may levy taxes on petrol sales within their jurisdiction, further adding to the final retail price. Customs Duty: While primarily impacting imported crude oil, fluctuations in customs duty rates can indirectly affect the cost of imported petrol and its subsequent pricing at the pump.

Why Does Petrol Price Vary Across India?

Petrol prices vary across Indian cities due to several localised factors: Local Taxes and Duties: Each state in India has the autonomy to levy its own Value Added Tax (VAT) on petrol, resulting in different tax rates across cities. States with higher VAT rates generally have higher petrol prices. Transportation Costs: The distance from major refineries or import terminals to cities affects transportation costs. Cities closer to these supply points may have lower transportation costs and, consequently, lower petrol prices. Dealer Commission: Petrol pump dealers receive a fixed commission per liter sold. The commission rate may vary slightly between cities based on local market conditions and operating costs. Local Demand and Competition: Cities with higher demand for petrol or greater competition among petrol pump operators may see more competitive pricing. Lower demand or fewer competitors can lead to higher prices due to reduced price competition. Understanding these localised factors helps explain the variability in petrol prices across Indian cities, highlighting the interplay between regional taxation policies, logistical considerations, market dynamics, and consumer behavior.