Delhi revises VAT rate to 30% on fuels making diesel and petrol costlier
The Delhi government has almost doubled the levy on diesel to 30%, executives of oil marketing companies said. The new VAT rate on petrol is also about 30%, according to state-run oil marketing companies.Updated: May 05, 2020, 12:44 IST
The retail price of diesel in Delhi has surged by Rs 7.10 per litre from Tuesday and petrol by 1.67 a litre as the state government raised value-added tax (VAT) on the auto fuels, according to state-run oil marketing companies.
Petrol price in Delhi has now been revised to Rs 71.26 per litre from Rs 69.59 a litre earlier and the new rate of diesel is Rs 69.39 a litre, a jump from Rs 62.29 per litre on Monday, according to Indian Oil Corporation (IOC).
The Delhi government has almost doubled the levy on diesel to 30%, executives of oil marketing companies said. The new VAT rate on petrol is also about 30%, they said.
Earlier, VAT in Delhi on petrol was 27% and 16.75% on diesel that attracted an additional Rs 250 per kilolitre air ambience charges, official data said.
Delhi is among the states that levy ad valorem duties on petrol and diesel.
Retail prices of fuels fluctuate in tandem with international oil markets. If international prices jump, these states gain revenue proportionately, but they lose revenue when international oil rates fall.
Currently, revenues of states having ad valorem duties on fuels have been hit badly as international oil prices plummeted steeply due to demand slump because of Covid-19 pandemic and lack of storage capacity.
The benchmark Brent crude price that was around $50 per barrel two months ago had plummeted below 20 on April 21. It is currently hovering around $28 per barrel.
The Centre levies specific excise duty on the two fuels. On March 14, it mopped up additional Rs 3 per litre from petrol and diesel each to fund its Covid-19 relief measures raising total central levies on petrol are to Rs 22.98 per litre on petrol and Rs 18.83 per litre.
Despite hikes in the central levies, pump prices of petrol and diesel were not raised due to a sharp decline in international oil prices.
Since March 16, state-run oil companies have abandoned the practice of daily revision of the two auto fuel rates, making up for their present and potential inventory losses.
Pump prices of petrol and diesel are different in different states because of variations on sales tax or VAT rates and other local levies.
States such as Tamil Nadu and Telangana have higher VAT rates, according to the oil ministry’s data-keeper Petroleum Planning and Analysis Cell (PPAC). Telangana charges 35.20% VAT on petrol and 27% on diesel. The VAT rates in Tamil Nadu are 34% and 25% on petrol and diesel, respectively.
In order to protect a sudden drop in their revenues due to a fall in international oil prices, some states have both ad valorem and specific rates. Specific rates are triggered only after international oil prices drop.
For instance, West Bengal has a sales tax on petrol at 25% or Rs 13.12 per litre, whichever is higher. Sales tax on diesel in the state is 17% or Rs 7.70 per litre, whichever is higher, according to PPAC.
Uttar Pradesh has a similar tax structure. Tax on petrol is 26.80% or Rs16.74 per litre, whichever is higher, and tax on diesel is 17.48% or Rs 9.41 per litre, whichever is higher.
Uttarakhand, Assam, Haryana, Himachal Pradesh and Jharkhand have similar taxation system as an ad-valorem rate allows them to reap the benefit of any spike in international oil prices and the specific tax rate ensures that their revenues do not fall beyond a set level even if global oil prices crash.
According to PPAC, Bihar has a different taxation system.
Petrol attracts 22% VAT if the sale price exceeds Rs 65 per litre, otherwise, a 26% VAT is charged. Similarly, the VAT rate on diesel is 15% if the sale price exceeds Rs 64 per litre, otherwise, 19% VAT is levied on the fuel.