<p>The recent hike of Rs 5, announced by the oil marketing companies, has increased the share of taxes to around 47 per cent of the total price.<br /><br />Petrol prices in Bangalore have gone up to Rs 71.09 per litre. Of this, Rs 17.06 goes to the Central government in the form of excise and customs levies. <br /><br />Another Rs 16.63 goes into levies charged by the State government such as sales tax and entry tax. Put together, Rs 33.69 goes into just taxes every time you buy a litre of petrol. In contrast, the cost of crude petroleum, including the cost of transportation, comes to around Rs 36.18 per litre.<br /><br />Prime source of revenue<br /><br />The reason for high taxes is simple: excise tax and sales tax are prime sources of revenue for both the Centre and the State government, respectively. Petrol is subjected to four levies: Central excise duty, customs duty, entry tax, and sales tax. An employee from an oil marketing firm said: “We can reduce the burden on the customers if both the Central and State governments reduce these levies. <br /><br />However, governments have their compulsions in spending, and they cannot but charge the levies to meet the expenditure on the spending."<br /><br />The Centre charges a fixed excise tax of Rs 14.35 per litre, and customs duty of 7.5 per cent on crude oil. </p>.<p>Further, the State government charges 25 per cent sales tax on petrol. Besides, it also charges a five per cent entry tax that is levied on every litre of petrol and diesel that enters the State.</p>.<p>The State government does not follow VAT for petrol, and instead follows an ad valorem system. This means that a rise in crude prices automatically increases the tax levied, furthering the burden on consumers. While the Union government has recently shifted from an ad valorem system to a fixed-rate system for excise tax, the State government is yet to adopt the same.</p>
<p>The recent hike of Rs 5, announced by the oil marketing companies, has increased the share of taxes to around 47 per cent of the total price.<br /><br />Petrol prices in Bangalore have gone up to Rs 71.09 per litre. Of this, Rs 17.06 goes to the Central government in the form of excise and customs levies. <br /><br />Another Rs 16.63 goes into levies charged by the State government such as sales tax and entry tax. Put together, Rs 33.69 goes into just taxes every time you buy a litre of petrol. In contrast, the cost of crude petroleum, including the cost of transportation, comes to around Rs 36.18 per litre.<br /><br />Prime source of revenue<br /><br />The reason for high taxes is simple: excise tax and sales tax are prime sources of revenue for both the Centre and the State government, respectively. Petrol is subjected to four levies: Central excise duty, customs duty, entry tax, and sales tax. An employee from an oil marketing firm said: “We can reduce the burden on the customers if both the Central and State governments reduce these levies. <br /><br />However, governments have their compulsions in spending, and they cannot but charge the levies to meet the expenditure on the spending."<br /><br />The Centre charges a fixed excise tax of Rs 14.35 per litre, and customs duty of 7.5 per cent on crude oil. </p>.<p>Further, the State government charges 25 per cent sales tax on petrol. Besides, it also charges a five per cent entry tax that is levied on every litre of petrol and diesel that enters the State.</p>.<p>The State government does not follow VAT for petrol, and instead follows an ad valorem system. This means that a rise in crude prices automatically increases the tax levied, furthering the burden on consumers. While the Union government has recently shifted from an ad valorem system to a fixed-rate system for excise tax, the State government is yet to adopt the same.</p>
