InvestorQ : What will be the overall impact of the petrol and diesel excise duty cuts on the tax impact overall?
Rutuja Nigam made post

What will be the overall impact of the petrol and diesel excise duty cuts on the tax impact overall?

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4 weeks ago
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Last week, a day ahead of the Diwali Festivities, the central government announced an unprecedented cut in excise duty on petrol by Rs.5 and on diesel by Rs.10 per litre. This was followed up by most of the BJP ruled states also cutting the levels of value added tax or VAT. As a result of this combination of cuts, the taxes on petrol has fallen from 50% of the total cost to 40% of the total cost. That would still offer huge relief to consumers.

In the case of petrol the price cut is Rs.13-14 while in case of diesel it is higher at Rs.18-19. There is still the risk of a spike in crude prices, which has already gone up to $81/bbl in the previous week, but that is an extraneous factor. Petrol prices will also have to factor in margins of petrol pump dealers who earn Rs.3.85 per litre commission on petrol and Rs.2.58 per litre on diesel. This is likely to cost the central government Rs.45,000 crore in lost revenues.

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