Data indicates that in the last five years, more than 20% of the Centre’s indirect tax revenue is earned through excise duty on petrol & diesel. State Governments also have a similar reliance on VAT on fuel. Here is a detailed analysis. After a 21-day continuous surge, the prices of fuel (petrol & diesel) in India came to a halt on 28June 2020. During this period, the price of diesel has recorded a historic high and the prices of both petrol & diesel have crossed ₹80 per litre (in Delhi). The surge in fuel prices during this period can be attributed to the increase in the crude oil prices in the international market coupled with the increase in central excise duty in May 2020 and other state taxes. However, this price rise is in continuation of the increase in fuel prices that can be traced back as far as April 2020. It ought to be noted that, there has been a record-fall in the global crude-oil prices during that period. This has resulted in reduced prices of Indian crude-oil basket, but there was no corresponding reduction in the fuel prices in India because of the steep increase in central excise duty. With the adverse effect of COVID-19 induced lockdown on economy and incomes of people, there have been calls from the opposition asking to government reduce taxes to ease the fuel-price burden. Central Excise duty and State Taxes form a key component of Retail fuel prices Retail Petrol/Diesel prices in India are an outcome of price build-up of four different components. As per the price build-up updated by one of the OMC’s, HPCL, the latest retail price of petrol in a HPCL retail Pump outlet is ₹ 80.47 in Delhi as of 01 July 2020. Of the retail selling price, the price charged to dealers by HPCL is ₹ 25.28 and the Commission being paid to the dealers is ₹ 3.64. The Central Excise Duty forms the major component with ₹ 32.98 i.e. nearly 41% of the total retail price at the petrol outlet. The States VAT charged in Delhi amounts to ₹18.57. The state VAT varies from state to state based on the tax rate in that state. The retail price of Diesel also has similar workings in its price build-up. Nine-fold increase in Central Excise duty on Diesel since May 2014 As highlighted earlier, Central Excise Duty is a fixed amount that is levied by the Government of India. This duty is not a percentage on price of the fuel. Hence the amount of duty is not impacted by the price of crude oil in the international market. When the NDA Government under PM Modi first came to power in May 2014, the Central Excise Duty on Diesel was ₹ 3.56 and the excise duty on Petrol was ₹ 9.48. The first hike in Central Excise duty was made in November’2014 with the duty increased to ₹ 11.02 and ₹ 5.11 on petrol and diesel respectively with a further increase in December’2014. The excise duty was revised a further four times in 2015 and thrice in 2016. Each time there has been an increase in the duty on both petrol and diesel with it reaching ₹ 21.48 and ₹ 17.33 respectively. On 04 October 2017, there was another revision, but this time the excise duty was reduced to ₹19.48 and ₹ 13.33 respectively. This was the first excise duty cut by the Modi Government. The cut in excise duty on fuel continued in 2018, with two more revisions. By end of 2018, the Central excise duty on petrol and diesel was ₹ 15.98 and ₹ 11.83 respectively. In May 2019, the Narendra Modi government came to power for the second time. In July 2019, there was a revision with a ₹ 2 increase in excise duty on both petrol & diesel. In March’2020 there was a significant hike in the excise duty on fuel by ₹ 5 per litre on both petrol & diesel. The latest revision of excise duty was on 06 May’2020 when the Central Government announced another major hike in the Central excise duty with an increase of ₹ 10 on petrol and ₹13 on diesel. As on date, the excise duty on Petrol is ₹ 32.98, while it is ₹ 31.83 in the case of diesel. Overall, in these six years of NDA government, the excise duty on petrol increased three-fold and it increased almost nine-fold in the case of diesel. Rajasthan, Karnataka and Telangana among states which levy highest VAT % on Fuel VAT & other taxes levied by the states has large variances in terms of type of charges, calculation as well as the extent of charges. Each individual state has autonomy in fixing these charges. In terms of the VAT % on Fuel, Rajasthan levies the highest with 38% & 28% VAT on petrol & diesel. Telangana charges 35.2% and 27%, while Andhra Pradesh charges 31% and 22.5% on petrol & diesel respectively. Karnataka charges a Sales Tax of 35% and 24%. While Maharashtra charges comparatively less VAT %, it has a higher fixed rate per lite with approximately ₹ 10 for petrol & ₹ 3 for diesel.