Petrol Tax in Kerala

  • Author :
  • TATA AIG Team
  • Published on :
  • 23/10/2023

Petrol is a commodity used by individuals who own vehicles for transportation purposes. Whether it is a commercial vehicle or a personal vehicle, it demands fuel to run. Fuel is categorised into two types based on vehicle usage: Petrol and diesel. Let us focus on petrol here.

The price an individual pays on a petrol pump in exchange for Petrol is its retail price. Generally, the fuel price is decided by the Ministry of Petroleum and Natural Gas. The petrol rates and prices in India are revised on a daily basis.

The price of petrol is decided, including various other factors such as excise duty, dealer commission, and value-added tax (VAT). The value-added tax varies from state to state in India, which is why petrol prices differ in different states.

Moreover, factors such as demand taxes, crude oil cost, rupee and dollar rates, etc., affect fuel prices in India

In this blog, we will understand in detail the central and state tax on Petrol in Kerala.

Different Petrol Taxes in Kerala

The petrol prices are revised every day at 6 a.m. by the oil marketing companies. There are different taxes that are levied on petrol. Various petrol taxes in Kerala that are levied on petrol consumption are:

Excise Duty

This is the kind of fuel tax in India imposed by the central government on petrol and diesel. The retailer collects these consumer taxes and pays them to the central government. The goal of imposing excise duty is to collect lump sum revenue, which can be used for various development purposes in the country.

*Sales Tax *

Another tax on petrol in Kerala is the sales tax imposed by the state government. While the excise duty is common all over India, state tax varies as the state government levies it.

*Additional Sales Tax *

This is another sales tax levied by the state government.

*Cess *

Cess is another tax Kerala's state government issues on petrol. This kind of tax is imposed to raise funds for specific purposes.

Factors that Determine Petrol Price in Kerala With Tax Details

Different factors affect the petrol price in Kerala, which are listed below:

Cost of Crude Oil

The first factor that affects the petrol price all over India is the cost of crude oil. The cost of crude oil directly affects the retail price of petrol. India presently imports 75% of its crude oil. The price at which India purchases and imports raw materials for petrol is influenced by the global price of crude oil and the foreign exchange rate for Indian rupee.

Oil exploration and production firms handle the remaining 25%. If the crude oil cost increases, the selling price of petrol increases and if it decreases, the selling price of petrol decreases. Various factors affect the crude oil cost, such as refineries' capabilities, weather reports, political instability in oil-producing countries, etc.

Excise Duty and VAT

Another factor that affects the petrol price is tax levied by state and central governments. The cost of petrol will increase if the government increases the excise duty tax and VAT. However, if both the tax decreases, the cost of petrol will decrease.

Dealer Costs

Oil marketing companies distribute petrol all across the country. For delivering the petrol, they charge a cost to the dealers. The companies or people who own fuel stations are dealers. They are the last people to offer petrol to customers.

The retail selling price (RSP), which includes taxes and the dealers' margins, is what the dealers charge for petrol. The dealers charge this fee from the consumer, another reason for increased petrol prices.

Dealer Commission

Further, there is a dealer commission paid by oil marketing companies to petrol pump owners. The commission paid to the petrol pump owner is another significant factor in deciding the petrol price in various states of the country.

Exchange Rate

Another factor affecting petrol prices is exchange rates. The exchange rate of Indian currency to base currency impacts the petrol price. If the INR weakens against the USD, the cost of buying the petrol would be high.

Computation of Petrol Price in Kerala

There are several steps involved that help in determining the petrol price, which are mentioned below:

Calculation of the Crude Oil Price

Indian oil marketing companies, or OMCs, buy unrefined oil from overseas oil-producing companies at benchmark rates. Indian oil marketing companies import the unrefined oil.

The cost of a litre of crude oil is computed by converting US dollars into Indian rupees and then divided by barrel oil quantity, which is 159L. Further, the freight charges are also included by the oil companies.

Calculation of Refinery Expenses

Once the oil is imported from overseas companies, the Indian OMCs transfer all these oils to their refineries for processing. The oil companies will process the unrefined oil, cluster various other products such as diesel, petrol and coal tar, and transfer it into their distillation towers.

The companies now calculate the cost of converting unrefined oil to refined one. Further, crude customs charges and port charges are also included in this.

Other Cost Elements

Oil marketing companies store the clustered oil in their reservoirs. Further, additional charges, such as dealer commission, excise duty, VAT, etc., are also included in the petrol price.

In short, the end consumer pays for the refining, procuring, marketing, excise duty, and state taxes.

So basically the petrol price in Kerala is the sum of the following thingS:

  • Crude oil cost and freight charges.

  • Profit margin of OMC, refining, transportation and freight charges.

  • Central and state tax on petrol in Kerala.

  • Dealer commissions and profit margin.

Are There Different Petrol Taxes in Different Cities in Kerala?

The petrol tax is the same in all cities of Kerala. However, individuals might notice price variations across different city petrol pumps. This is due to the dealer's commission set by the OMCs. Every morning at 6 a.m., all gas stations in Kerala update their prices.

Kerala now uses a marginally varied pricing scheme for gas stations. As a result, pricing at various locations and branches of the same oil marketing company varies.

Need for Motor Insurance Policy

The price of petrol may go up or down on certain days, but 2 and 4-wheelers are a daily requirement for the people in Kerala and other parts of India. And to ride/drive your vehicle on public roads, you need a few essential documents like a valid driving licence, vehicle RC and a two or four-wheeler insurance policy, depending on your vehicle type.

Third-party two or four-wheeler insurance is mandatory in India before getting on the road. But nowadays, people like to have enhanced safety while riding/driving their vehicles.

With acts of vandalism and theft prevailing, car owners would prefer a car insurance policy that provides coverage against everything, from damages caused to vehicles by natural calamities such as floods, cyclones, etc., to personal accident damages.

Also, with a comprehensive car insurance policy, policyholders can take advantage of cashless claims in the network garages. Policyholders do not have to pay anything for the repair at the garage. The settlement will be done by the insurance company to network garages directly. Tata AIG has a network of 7500+ network garages nationwide, offering cashless car repair services to policyholders.

Conclusion

The state and central government levied tax on petrol in Kerala. However, the tax levied by the government and other factors are volatile, so the price of petrol changes frequently. Furthermore, the tax on petrol and diesel is not included in the GST, which means any financial crises in a country, such as healthcare or politics, can lead to high fuel taxes.

FAQs

What is the tax on 1 Litre of petrol in Kerala?

For 1 litre of petrol in Kerala, the average dealer commission is ₹3.66 per litre, and VAT is ₹24.93 per litre, which makes the retail selling price of petrol in Kerala around ₹105.84 per litre.

Is there GST on Petrol in Kerala?

Currently, petrol and diesel do not have any Goods and Services tax.

What is meant by petrol Tax in India?

The tax levied by the government of India on petrol usage, which the consumer pays at the petrol pump, is considered a petrol tax in India. The excise duty on petrol, which the central government imposes, is the same nationwide. However, the state tax or VAT may vary from state to state as the state government imposes it.

Why is Petrol so expensive in India?

The petrol price depends on various factors such as importing oil from overseas companies and refinement procedures. Further, there is also dealer commission and central and state government-levied taxes, which makes petrol expensive in India.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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