In India, the price of petrol that consumers pay at the pump
In India, the price of petrol that consumers pay at the pump is made up mostly of taxes. The actual base cost of petrol, which comes from the price of crude oil in global markets and the refining charges, is only a fraction of the final price. Once this base price is set, multiple layers of taxes are added before it reaches the consumer.
The central government imposes excise duty on every litre of petrol. This is a fixed amount and forms a significant part of the price. State governments then add their own Value Added Tax (VAT), which varies from state to state. That is why petrol prices differ across the country. Some states impose higher VAT, which pushes up the price in those regions compared to others.
On top of these taxes, there are smaller components like dealer commissions and transport charges. But these are relatively minor compared to excise duty and VAT. In most cases, more than half of the retail price of petrol is actually taxes. For example, if petrol costs around ₹100 a litre, often about ₹50 or more goes directly into government revenue through excise and VAT.
This heavy taxation is the main reason petrol in India remains expensive, even when global crude oil prices fall. The government relies heavily on petrol and diesel taxes as a major source of revenue, which is why these fuels are not included under the Goods and Services Tax system. As a result, consumers continue to pay high prices, largely driven by the tax structure rather than the actual cost of fuel.
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