Oil marketing companies (OMCs), facing financial pressure due to the West Asia crisis, increased the price of petrol and diesel by Rs 3 per liter three days ago. Given the pressure from OMCs, speculation is rife that retail prices of petrol and diesel will rise further. Consequently, many political parties and experts are now urging states to reduce the VAT (Value Added Tax) rate on petrol and diesel, so that the public can get relief from the rising prices of petrol and diesel.
Due to the huge difference in VAT between states, the retail price of petrol in Port Blair is currently Rs 84.99 per liter, while in Telangana it is Rs 113 per liter. In Telangana, the state government levies 35.20 percent VAT on petrol and 27 percent on diesel. In Andaman and Nicobar, the state government levies 1 percent VAT on both petrol and diesel. The central government levies excise duty on petrol and diesel and recently the center has reduced this tax by Rs 10 per liter.
Currently, the central government collects an excise tax of ₹11.90 per liter on petrol and ₹10.20 per liter on diesel.
In view of the substantial VAT collections by the state governments, the Congress party has demanded that the BJP government in Delhi, and the Biju Janata Dal (BJD) has demanded that the BJP government in Odisha reduce VAT to provide relief to the public. A Rajya Sabha MP from the BJD has even urged the Finance Minister to include petrol and diesel in the GST and impose a 28 percent tax on them.
The increase in petrol and diesel prices is bound to increase retail inflation, as most consumer goods are transported by diesel-powered vehicles. SBI Research estimates that this increase in the retail price of petrol and diesel could lead to a 0.20 percentage point increase in retail inflation.
However, HDFC Bank’s Chief Economist Sakshi Gupta believes that if the retail price of petrol and diesel increases further and consumption starts decreasing due to this, then a situation will arise for reduction in VAT by the states.
VAT is charged on petrol and diesel in each state
Andaman and Nicobar Islands ———- 1 percent on both petrol and diesel
Andhra Pradesh ———- 31 percent on petrol, 22.25 percent on diesel
Assam —– 24.77 percent on petrol, 22.19 percent on diesel
Delhi —– 19.40 percent on petrol, 16.75 percent on diesel
Haryana —– 18.20 percent on petrol, 16 percent on diesel
Bihar —– 23.58 percent on petrol, 16.37 percent on diesel
Chhattisgarh —- 24 percent on petrol, 23 percent on diesel
Gujarat —- 13.7 percent on petrol, 14.9 percent on diesel
Uttar Pradesh —- 19.36 percent on petrol and 17.08 percent on diesel
Telangana —– 35.20 percent on petrol and 27 percent on diesel
West Bengal —- 25 percent on diesel and 17 percent on diesel
Puducherry —– 16.98 percent on petrol and 11.22 percent on diesel
Jharkhand —- 22 percent on petrol and 22 percent on diesel
Himachal Pradesh —- 17.5 percent on petrol and 13.90 percent on diesel
