Here’s How much do States and Center earn from fuel

Fuel prices in India vary every month or every day due to external factors like global crude oil prices. Internal factors such as taxes and dealers’ commission also affect the price of domestic petrol.

Another noteworthy fact is that the prices of petrol and diesel vary from state to state and even from city to city. For example, petrol in Delhi is being sold at Rs 105.41 per liter on Thursday, while in Mumbai it is priced at Rs 120.51. Similarly, the rate of diesel is Rs 95.87 per liter while its cost in financial capital is Rs 104.77.

This difference in the retail prices of fuel in the two cities is due to the different tax rates levied by the respective state governments on the same product.

It is also important to note that the tax on fuel is not covered under the Goods and Services Tax (GST).

Taxes on petrol and diesel are divided into several components at the state and central level. Centrally, while some taxes are fixed, others are ad valorem, meaning the tax is levied as part of the price of the commodity.

Similarly, state taxes are also a mixture of ad valorem and fixed. In many states, ad valorem taxes have an upper limit, meaning that even when prices rise by more than a point, taxes do not increase.

How much do states and center earn from fuel?

Petrol and diesel are two of the highest taxed goods in the country and bring in huge revenue for both the central and state governments.

Finance Minister Nirmala Sitharaman had told the Rajya Sabha last year that the Center has earned around Rs 8 lakh crore from taxes levied on petrol and diesel in the last three financial years. Out of the total amount, more than Rs 3.71 lakh crore was recovered in 2020-21 itself.

To get a better understanding of how fuel is taxed in India, the Twitter handle of Stats of India posted in March this year how much Rs 100 tax is paid on petrol in different states of India.

Government data from Stats of India shows that in seven states half the price of petrol is collected as tax. In this, Maharashtra is Rs 52.5, Andhra Pradesh Rs 52.4, Telangana Rs 51.6, Rajasthan Rs 50.8, Madhya Pradesh Rs 50.6, Kerala Rs 50.2 and Bihar Rs 50.

How much tax do you pay on ₹100 petrol?

The data showed that the states/UTs with the lowest taxes are Andaman and Nicobar Islands and Lakshadweep, Puducherry, Meghalaya, Mizoram and Arunachal Pradesh.

What did PM say?

The issue of fuel taxes was raised on Wednesday after Prime Minister Narendra Modi accused some states of doing “injustice” to the people by not reducing taxes on petrol and diesel during the COVID-19 review meeting.

He called the states of Maharashtra, West Bengal, Telangana, Andhra Pradesh, Kerala, Jharkhand, Tamil Nadu in this matter and said that he did not want to get into the debate on how much these states earned in terms of revenue in the past. Six months, but only wanted to provide benefits to the people.

However, Modi’s statements did not go down well and quickly became a flashpoint. Maharashtra Chief Minister Uddhav Thackeray said the Center owes the state Rs 26,500 crore and also accused the Modi government of treating Maharashtra step-motherly.

“The central government owes the Maharashtra government Rs 26,500 crore. In a statement, Thackeray said Maharashtra’s contribution to direct tax collection at the national level is 38.3 per cent and its share in GST (collection) is 15 per cent, but the Center gives us step-motherly treatment.

“I am sharing the details with the public because of concern. Maharashtra receives 5.5 per cent of the total central taxes on various goods. He said that if VAT and central taxes are combined, Maharashtra collects the highest amount in the country.

“Despite being the top contributor, Maharashtra is neglected by the central government,” the chief minister said.

Thackeray also said that on a liter of diesel sold in Mumbai, the Center gets Rs 24.38, while the state gets Rs 22.37. He said the equal share on one liter of petrol sold in Mumbai is Rs 31.58 and Rs 32.55 respectively.

West Bengal Chief Minister Mamata Banerjee also hit out at the Prime Minister, saying his remarks were misleading. “Today’s conversation with Prime Minister Narendra Modi was completely one-sided and misleading. The facts shared by him were wrong. We are providing subsidy of Re 1 on every liter of petrol and diesel for the last three years. We have spent Rs 1,500 crore on this,” Banerjee said while addressing reporters at the state secretariat.