After the Central Government deducted excise duty on petrol by ₹ 5 per litre, the Chandigarh Administration also lowered VAT by ₹ 7 per litre on petrol, thus reducing the higher fuel price in this Union Territory.

If you are interested to know more about petrol tax in Chandigarh, keep reading!

The Central Government charges excise duty (₹ 19.90 per litre) on petrol, while the Chandigarh Administration levies VAT (approximately ₹ 12.73 per litre) on petrol. These tax rates charged on petrol constitute its price in the UT, along with other factors such as dealers' commissions, price of crude oil etc. Approximately two-thirds of the petrol price comprises the tax rates charged by State and Central Governments.

Factors that determine the petrol tax in Chandigarh are mentioned below:

1. Demand and Supply of Petrol

It often becomes difficult for oil refinery companies to meet the increasing demand for petrol due to higher input costs, leading to less petrol available in the market. Thus, higher demand and lower supply raise the petrol price. Moreover, OMCs often maintain a stock of crude oil for up to six weeks, which also lowers the supply of petrol in the face of its increasing demand, thus impacting petrol prices in India.

2. Dealers' Commissions

Oil Marketing Companies provide a commission to petrol pump owners, covering their income, expenses, and profit. This commission charged by dealers affects the petrol price in Chandigarh.

3. Cost for Dealers

Oil Marketing Companies levy a charge to dealers to distribute crude oil after considering refining cost, freight charges etc. This price charged to dealers is essential in determining the petrol price in Chandigarh.

4. Price of Crude Oil

Crude oil is refined into petrol and is imported from the international market. Hence, any change in the price of crude oil due to variation in its demand and supply, international political relations, oil reserves and supplies directly affect petrol price in India.

5. Sales Tax and Excise Duty

Each state government levies VAT or sales tax on petrol, and it varies from one state to another. The Central Government charges excise duty on petrol, which is not a percentage but an amount of money. Hence, it remains fixed irrespective of changing fuel and crude oil prices.

The tax imposed by the Central Government rose by three times from ₹ 9.48 per litre (FY 2014) to ₹ 27.90 per litre (FY 2021).

These tax rates influence the petrol price in Chandigarh.

6. Valuation of Indian Currency Against US Dollars

As mentioned above, crude oil is purchased from foreign countries; hence, the transaction is completed in dollars. Therefore, the valuation of Indian rupees against American dollars impacts the purchasing price of crude oil, directly affecting the petrol price in the domestic market.

Yes, the Chandigarh Administration imposes an equal rate of VAT on petrol in Chandigarh. Thus, residents of the UT shall pay a uniform tax rate on petrol.

Bearing a clear knowledge about the petrol tax in Chandigarh and additional crucial aspects will encourage residents to learn about the components that make up the petrol price they are paying.