No, State Govts Do Not Charge More Tax Than Centre on Petrol
The claim that the Centre only imposes a tax of Rs 16 on petrol is false. Its tax is more than the state tax.
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Several posts on social media claim that the ‘state government’ is charging more tax than the central government on petrol. The posts also give a dubious price build-up without referring to a particular state, alleging that the state government is charging a Value Added Tax (VAT) of over Rs 40, while the central government charges an excise duty of Rs 16 to 18.
However, we found that the claim is false as the component of the central tax is more than that of the state tax in the prices of petrol. This comes as the petrol price crossed the Rs 100 per litre mark on Wednesday, 17 February, for the first time in Rajasthan.
CLAIM
The social media posts state that all petrol pumps should have a board with the following price build-up:
Basic rate: Rs 31.50
Central Government: Rs 18.50
State Government: Rs 40.50
Distributor: Rs 9.50
Total Price: Rs 100 Per Litre
The exact buildup may vary in each claim but they suggest that the central government’s tax is less than that of the state government.
WHAT WE FOUND OUT
According to a report by the LiveMint, the share of taxes - including both state and Centre - in the retail price of petrol has been around 67 percent in the two months of 2021. This is a significant increase from a 45 percent share in late 2014, under the Narendra Modi government.
It must be noted that the under the Congress-led government, from 2004 and 2014, the “crude component was around 51 percent on average, and taxes and other charges comprised 49 percent.”
HOW MUCH TAX IS IMPOSED BY THE CENTRE?
The Centre imposes an excise duty on fuel, which remains the same across all states. Rs 32.90 per litre of excise duty is levied on petrol and Rs 31.80 a litre on diesel, as of February 2021.
In 2014, the excise duty was at Rs 9.48 per litre on petrol and Rs 3.56 per litre on diesel. This means that there has been a 10-fold increase on tax on diesel and about four-fold on petrol over a period of seven years.
In fact, the central government’s excise duty on petrol has seen a significant hike from Rs 19.28 per litre, at the beginning of 2020, according to a report by The Indian Express.
HOW MUCH TAX DO THE STATES CHARGE?
The state governments, on the other hand, impose a Value Added Tax, which differs across states.
According to the price build-up on Indian Oil Corporation’s website, as of 16 February 2021, the price of a litre of petrol in Delhi was Rs 89.29, which includes a base price of Rs 31.82, excise duty of Rs 32.90, a dealer commission of Rs 3.68 and a VAT of Rs 20.61.
Similarly, Bharat Petroleum Corporation’s retail price also stood at Rs 89.29 for a litre of petrol in Delhi, on 16 February. The price build-up for Hindustan Petroleum Corporation as of 1 February can also be viewed here.
The percentage of VAT charged by different states can be viewed in a table by the Petroleum Planning and Analysis Cell. According to this table, Delhi imposes a 30 percent VAT, while other states also include additional charges including a component for urban transport fund and road maintenance cess.
DOES ANY STATE CHARGE Rs 40 AS TAX?
According to a report by news agency PTI, dated 18 February, states like Rajasthan, Madhya Pradesh and Maharashtra had the highest fuel prices. The petrol price crossed the Rs 100 mark in different regions of these states.
Following the price hike, several states announced a cut in their VAT. While Rajasthan cut two percent, bringing its VAT down to 36 percent, other states like Assam, Meghalaya, Nagaland and West Bengal also slashed the taxes, as reported by LiveMint.
Sirohi added that petrol is being given to the dealer at the rate of Rs 31 -33 per liter and different companies offer different base prices.
So, if the base price is about Rs 33 per liter, adding an excise duty of Rs 32.90, and a dealer commission of about Rs 4, the total comes up to Rs 69.90. On this, the Rajasthan government would charge 25 rupees.
Hence, even in Rajasthan, with the highest tax collection, petrol is not being charged Rs 40 per liter.
Evidently, the viral claim is false, as the central government’s excise duty is higher than the VAT charged by states on petrol.
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