EXCISE DUTY ON PETROL/DIESEL

EXCISE DUTY ON PETROL/DIESEL

TOPIC: Economy

Section: Fiscal Policy

Context- The government has ruled out cutting central excise duty on petrol and diesel. In the mean time, it is looking to the Russian window for supply of crude, which is expected to cushion the impact of surging prices of Indian basket of crude.

Concept-

Petrol and Diesel Prices:

• In the past few months, retail prices of petrol and diesel have consistently increased to all-time high levels.
• Public sector Oil Marketing Companies (OMCs) revise the retail prices of petrol and diesel in India on a daily basis, according to changes in the price of global crude oil.
• The price charged to dealers includes the base price set by OMCs and the freight price.
• The break-up of retail prices of petrol and diesel in Delhi shows that around 54% and 49% of the retail price of petrol & diesel respectively comprises central and states taxes.
• The central government taxes the production of petroleum products, while states tax their sale.
• The central government levies an excise duty of Rs 32.9 per litre on petrol and Rs 31.8 per litre on diesel. These make up 31% and 34% of the current retail prices of petrol and diesel, respectively.
• While excise duty rates are uniform across the country, states levy sales tax/ Value Added Tax (VAT) which varies across states.
  • For instance, Odisha levies 32% VAT on petrol, while Uttar Pradesh levies 26.8% VAT or Rs 18.74 per litre, whichever is higher.

Excise Duty:

• An excise or excise tax (sometimes called an excise duty) is a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country).
• It is a tax on the production or sale of a good.
• Excise duty is a form of indirect tax.
• Excise duty has been replaced by the Goods and Services Tax(GST) w.e.f. 1 July 2017.