Impacts of Fuel Price Reduction in Indian Economy | Civil Service Malayalam

What Makes Up Retail Fuel Prices?

  • The retail price of gasoline and diesel is primarily made up of three components:
    • Base price (reflecting cost of international oil)
    • Central Excise Duty
    • State Tax (VAT)
  • Central and state taxes form a major chunk of the price of petrol and diesel in India.
  • Excise duty is constant for all over India, state taxes (sales tax and value added tax) vary depending upon the rates levied by different state governments.
  • These taxes make fuel even more costly for consumers.

What do the government's earnings from fuel prices look like? 

  • Fuel duty and VAT are significant sources of revenue for both the Centre and the states.
  • According to the Budgets 2020-21, excise duty on fuel accounts for approximately 18.4 percent of the Centre's gross tax revenues.

What are the State's Constraints in Reducing Fuel Taxes?

  • Major Revenue Source: Petroleum and liquor make up about a third of state tax revenue
  • Pandemic Effects: The economic downturn and the pandemic had resulted in increased spending and lower revenue.



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True Learn30 Education Services LLP: Impacts of Fuel Price Reduction in Indian Economy | Civil Service Malayalam
Impacts of Fuel Price Reduction in Indian Economy | Civil Service Malayalam
True Learn30 Education Services LLP
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