This information in this article was last updated on 21st October 2022.

The rising petrol price has raised concern among Indian motorists. Keeping that concern in mind, the Central Government reduced the excise duty on petrol by ₹ 5 per litre. Similarly, it has requested states to lower VAT on petrol to reduce its overall price. However, the Maharashtra Government refused to reduce VAT as it is its significant source of revenue.

Want to know more about petrol tax in Mumbai? If yes, keep scrolling!

Maharashtra Government levies tax on petrol in Mumbai and other cities. The Central Government also imposes an excise duty of ₹ 27.90 per litre on petrol. Thus, both excise duty and VAT determine the petrol price, among other factors such as crude oil's price, dealer's commissions, etc.

Moreover, the State Government shares revenue earned from imposing excise duty by the Central Government. However, revenue from cess and additional excise duty is not transferred to the state.

Take a look at the factors that influence the petrol tax in Mumbai:

1. Price of Crude Oil

Change in price of crude oil directly affects petrol prices. Factors that affect crude oil’s price are – its demand and supply, oil reserves and its supplies in future and international political relations.

2. Dealer's Commissions

OMCs give a commission to petrol pump owners, which also affects the petrol price.

3. Cost for Dealers

Oil Marketing Companies obtain and distribute crude oil. These companies charge a specific to dealers after considering factors such as refining cost and freight charges. This price set by OMCs acts as an essential determinant of petrol price.

4. Excise Duty and Sales Tax or VAT

VAT varies with every state as each State Government imposes VAT after factoring in specific pointers such as dealer's commission, excise duty, etc.

5. Demand and Supply of Petrol

The two and four-wheeler vehicles are increasingly plying on Indian roads, contributing to rapid demand for fuels in India. Often, oil refinery companies fail to meet these increasing demands for petrol due to a lack of supply of crude oil, increasing the price of petrol.

6. Valuation of Rupee Against US Dollars

The crude oil is purchased from the international market, and the transaction is completed in the American dollar. So, a change in the valuation of the US dollar against Indian currency directly affects the purchasing cost of crude oil and, consequently, the petrol price.

As mentioned earlier, the Maharashtra Government imposes an equal VAT rate on petrol across the state. Hence, residents of Mumbai and other cities will pay the applicable VAT levied by the State Government. However, petrol prices may differ across cities in Maharashtra, given the change in the commission charged to dealers.

Thus, this is all about the petrol tax in Mumbai. Additionally, note that petrol prices keep changing due to the aforementioned factors. So, keep an eye on the latest updates to avoid inconvenience.