The Centre will earn Rs 1.87 lakh crore in FY21 from the Rs 13-16/litre more cess and surcharges imposed on auto fuels in March 2020 and later in the month of May of the similar year. Going by the projection of 8% rise in fuel demand in FY22, the Centre’s incremental earnings from the two auto fuels could be more than Rs 2 lakh crore, if it chooses not to minimize the tax prices.
On Tuesday, retail petrol price tag in Delhi touched an all-time higher of Rs 89.29/litre, increasing by Rs 4.69/litre because the similar day a month ago, as OMCs steadily improved the base-price tag of the items amid increasing international crude costs.
The base price tag (price tag to the dealer) comprises 36% of the retail petrol prices in Delhi, whilst state VAT tends to make up 23% and central taxes account for 37% of the final fuel price tag paid by the finish user. Freight charges and dealer commission (about 3%) are the other elements of the final price tag.
The government estimates petrol and diesel consumption in FY21 to be 101.6 million tonne, down 9.8% from FY20.
Despite decrease demand, the Union government’s earnings from taxes on petrol and diesel in set to rise a whopping 82% to Rs 4 lakh crore in the present fiscal. In FY22, the income could be Rs 4.3 lakh crore, of which more than Rs 49,000 crore will come from the agriculture infrastructure improvement cess imposed by the government by means of FY22 Budget on February 1.
As per Budget FY22, the revised estimate on income from ‘Union Excise Duties is set at Rs 3.61 lakh crore, as against Rs 2.67 lakh crore collected in FY20. The Budget estimate for FY22 is Rs 3.35 lakh crore. Given the estimates based on consumption, the RE for FY21 could be surpassed. Also, it seems the government has factored in the possibility of cuts in tax rates for next year’s estimate.
In March, 2020, the particular more excise duty (surcharge) on auto fuels was improved by Rs 2/litre and road cess was raised by Rs 1/litre. Subsequently in May, 2020, road cess on petrol and diesel was improved once again by Rs 8/litre, whilst the surcharge was hiked by Rs 2/litre for petrol and Rs 5/litre for diesel. As a outcome, the Centre’s tax (standard excise, surcharge, agri-infra cess and road/infra cess) is at the moment Rs 31.83/litre for diesel and Rs 32.98/litre for petrol.
To offset the impact of the new cess on finish customers, the surcharge on each petrol and diesel prices have been lowered by only Rs 1/litre whilst standard excise duty prices now stand lowered at Rs 1.4/litre for petrol and Rs 1.8/litre for diesel. Till the imposition of the agri-infra cess, the standard excise prices have been Rs 4.83 (diesel) and Rs 2.98 (petrol) because February, 2018.
While the cesses and surcharge are not sharable with the states, they get 42% of the auto-fuel excise duty earnings from the standard excise duty element. Of course, the states levy their personal VAT on petrol and diesel, which goes exclusively to the state coffers, but present higher costs limit the scope of rising VAT additional. The states acquire from the greater Central taxes as their tax is levied on a base that contains the Central taxes. The states’ tax income from VAT on the fuels have fallen 17.6% annually to Rs 78,164 crore in the initial half of FY21.