What Makes Up Retail Fuel Prices? The retail price of gasoline and diesel is primarily made up of three components: Base price (reflecting c...
What Makes Up Retail Fuel Prices?
- The retail price of gasoline and diesel is primarily made up of three components:
- Base price (reflecting cost of international oil)
- Central Excise Duty
- State Tax (VAT)
- Central and state taxes form a major chunk of the price of petrol and diesel in India.
- Excise duty is constant for all over India, state taxes (sales tax and value added tax) vary depending upon the rates levied by different state governments.
- These taxes make fuel even more costly for consumers.
What do the government's earnings from fuel prices look like?
- Fuel duty and VAT are significant sources of revenue for both the Centre and the states.
- According to the Budgets 2020-21, excise duty on fuel accounts for approximately 18.4 percent of the Centre's gross tax revenues.
What are the State's Constraints in Reducing Fuel Taxes?
- Major Revenue Source: Petroleum and liquor make up about a third of state tax revenue
- Pandemic Effects: The economic downturn and the pandemic had resulted in increased spending and lower revenue.
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