Petrol, diesel price build-up: How much tax do you pay on one litre of petrol and diesel? Here's a breakdown

The Union Government, in a gazette notification dated 26 March, slashed the special additional excise duty on petrol and diesel, bringing much relief to oil marketing companies amid heightened pressure due to the risk of fuel supply amid the US-Iran war in the Middle East.

In its notification on Thursday, the government said it was slashing the special additional excise duty on petrol from ₹13 per litre to ₹3 per litre. Similarly, the duty on diesel was reduced from ₹10 per litre to nil.

The duty cuts are effective immediately, the finance ministry said in its notification.

Oil marketing companies in India have been under pressure as retail petrol and diesel rates have remained steady even as global crude oil prices saw a 50% surge since 28 February, when the United States and Israel launched military strikes against Iran, triggering sweeping retaliation from Tehran.

International oil prices touched $119 per barrel earlier this month, before pulling back to around $100 per barrel.

Petrol prices have remained steady across India on Friday — ₹94.77 in Delhi, ₹101.06 in Chennai, ₹102.96 in Bengaluru, ₹103.54 in Mumbai, ₹105.41 in Kolkata, and ₹107.5 in Hyderabad.

With petrol and diesel prices gaining the central stage, it must be noted that the retail price of auto fuel comprises several components, including central excise duty, VAT/state tax, and dealer commission. Here is a breakdown of how petrol and diesel are taxed in India.

Central excise duty on petrol and diesel

The Union government levies a uniform excise duty and a basic customs duty on petrol and diesel across the country. This duty is charged to Oil marketing companies, who pass it on to customers.

According to the latest data from the Petroleum Planning and Analysis Cell (PPAC), ahead of the duty cut on petrol, the government was charging a total of ₹21.90 customs duty on one litre of petrol.

This included ₹1.40 basic excise duty, ₹13 special additional excise duty, ₹2.50 agriculture infrastructure and development cess and ₹5 road and infrastructure cess.

After the revision, the total excise duty paid on petrol will be ₹11.90 per litre.

Similarly, on diesel, the incidence will be ₹17.80 per litre ( ₹1.80 on the basis of excise duty, ₹13 on the special additional excise duty, ₹4 on the agriculture infrastructure and development cess, and ₹2 on the road and infrastructure cess).

After the revision, the central excise duty on diesel has been lowered to ₹7.80 per litre.

VAT and state tax

VAT on petrol and diesel varies from state to state. For example, Delhi charges a VAT of ₹15.40 per litre on petrol and ₹12.3 per litre on diesel, according to the latest data from Indian Oil.

Similarly, in Mumbai, VAT is 25% on petrol and 21% on diesel; in Kolkata, it is 25% and 17% on petrol and diesel, respectively; and in Chennai, it is 13% and 11% on petrol and diesel, respectively.

Other charges

Apart from taxes, OMCs also charge retail customers a dealer commission. All these charges decide the final retail petrol and diesel rates.

Will petrol and diesel prices go down now?

Despite the cut in the special additional excise duty on fuel, petrol and diesel rates are unlikely to be lowered at the retail level, as the cost is being absorbed by the government to bail out OMCs.

“Hon'ble Prime Minister @narendramodi Ji, in keeping with his Government's commitment of last 4 years since the conflict in Russia-Ukraine started, decided to take a hit on its own finances again to safeguard the Indian citizen. Government has taken a huge hit on it taxation revenues to ensure very high losses of oil companies (approximately 24 Rs/litre for petrol and 30 Rs/litre for diesel) at this time of sky high international prices are reduced (sic),” Union Minister Hardeep Singh Puri said on X.