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.
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 Rs 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 the Rs 5 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 Rs 31.80 per litre and 16.75 per cent of VAT plus air ambience charges of Rs 250 per kilolitre, brought the total incidence of taxation in Delhi to 48 per cent.
This, after the Rs 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 Rs 52.01 a litre in Chennai to Rs 59.89 in Ladakh.
On top of this, the central government charges an excise duty of Rs 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 of Rs 30.51 a litre, followed by Maharashtra with Rs 29.99, Andhra Pradesh (Rs 29.02) and Madhya Pradesh (Rs 26.87).
The lowest VAT of Rs 4.93 a litre is levied in Andaman & Nicobar. Similarly, the basic price of diesel varies from Rs 52.13 a litre in Chennai to 59.57 in Ladakh. On top of this, the central government charges an excise duty of Rs 21.80. The highest VAT of Rs 21.19 a litre is levied in Andhra Pradesh, followed by Rs 21.14 in Rajasthan and Rs 20.21 in Maharashtra.
Himachal Pradesh levies the lowest VAT of Rs 4.40 a litre, and Andaman & Nicobar charges Rs 4.58. Petrol pump dealers are paid Rs 3.85 per litre commission on petrol and Rs 2.58 on diesel.
Petrol prices have been further reduced by as much as Rs 8.7 per litre and diesel Rs 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 Rs 5 per litre and that on diesel by Rs 10 a litre to give reprieve to consumers battered by record-high retail fuel prices. This announcement was matched by 24 states and Union Territories cutting VAT rates in different proportions.
This has led to BJP and its partner-ruled states witnessing steeper reductions in petrol and diesel prices in comparison to Maharashtra, Delhi, West Bengal and other states that are governed by other political parties, according to a price chart of different locations prepared by state-owned oil firms.
The additional reduction, on top of the excise duty cut, is the lowest in Uttarakhand because of lower duty cuts and the highest in Ladakh. On petrol, the price reduction over-and-above excise reduction ranges from Rs 1.97 per litre in the case of Uttarakhand to Rs 8.70 in the case of Ladakh.
For diesel, the additional reduction warranted by VAT cuts, ranging from Rs 17.5 a litre in Uttarakhand to Rs 9.52 in the case of Ladakh. The states that extended additional VAT benefits include Karnataka, Puducherry, Mizoram, Arunachal Pradesh, Manipur, Nagaland, Tripura, Assam, Sikkim, Bihar and Madhya Pradesh.
They also include Goa, Gujarat, Dadra & Nagar Haveli, Daman & Diu, Chandigarh, Haryana, Himachal Pradesh, Jammu & Kashmir, Uttarakhand, Uttar Pradesh, Odisha, Meghalaya and Ladakh. States that have so far not lowered VAT include the Congress and its allies-ruled Rajasthan, Punjab, Chhattisgarh, Maharashtra, Jharkhand and Tamil Nadu.
They also include AAP-ruled Delhi, TMC-governed West Bengal, Left-ruled Kerala, TRS-led Telangana and YSR Congress-ruled Andhra Pradesh. Wednesday's excise duty cut had translated into a reduction in the price of petrol in the range of Rs 5.7 to Ras 6.35 per litre across the country and diesel rates by Rs 11.16 to Rs 12.88.
Since states charge VAT not just on the base price but also on the excise duty levied by the Centre, the total incidence of price reduction was higher than Rs 5 a litre cut in excise duty on petrol and Rs 10 per litre cut in diesel.
The reduction was larger in states with higher VAT. In Delhi, the reduction in petrol price was Rs 6.07 per litre, and that on diesel was Rs 11.75, according to the price chart. After duty changes, the costliest petrol is sold in Rajasthan at Rs 111.10 per litre (Jaipur), followed by Mumbai (Rs 109.98) and Andhra Pradesh (Rs 109.05).
The fuel is below Rs 100-a-litre-mark in most BJP-ruled states baring Karnataka (Rs 100.58), Bihar (Rs 105.90), Madhya Pradesh (Rs 107.23) and Ladakh (Rs 102.99).