The soaring prices of petrol and diesel have become a major concern for every Indian household. While global crude oil prices fluctuate, the retail price in India often remains high. The primary reason behind this is not just the cost of oil, but the heavy taxation imposed by both the Central and State governments.

Understanding the Tax Structure When you purchase one liter of petrol, you are paying for more than just the fuel. The final price includes the Base Price, Freight charges, Central Excise Duty, State VAT (Value Added Tax), and Dealer Commission. Currently, the Central Government levies a fixed Excise Duty of approximately ₹19.90 per liter on petrol.

Following this, State governments apply their own VAT, which varies significantly across India. For instance, states like Rajasthan and Maharashtra have some of the highest tax rates, making fuel more expensive compared to other regions. Effectively, taxes and commissions account for nearly 45% to 50% of the total price you pay at the pump.

The GST Debate There has been a persistent demand to bring petroleum products under the Goods and Services Tax (GST). If petrol were taxed at the highest GST slab of 28%, the retail price would drop drastically, potentially reaching below ₹70 per liter. However, since fuel taxes are a massive source of revenue for both the Center and the States, there is significant resistance to this move.

For the common man, the pinch is real. Every time global oil prices rise, the retail price spikes, but when they fall, the benefit is often offset by increased government levies. Understanding this “Tax-on-Tax” system is crucial for every consumer to realize why their commute is becoming more expensive by the day.