All About Petrol Tax in Jammu and Kashmir

The Central Government offered tax relief on petrol by ₹5 per litre and requested other states do the same to relieve Indian citizens from rising petrol prices. The Administration of Jammu and Kashmir accepted this Centre’s decision and reduced the petrol tax in Jammu and Kashmir.

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What Is the Petrol Tax Levied in Jammu and Kashmir?

Lieutenant Governor of Jammu and Kashmir, Manoj Sinha, stated that the Prime Minister of India had gifted citizens a Diwali gift by reducing excise duty on petrol. Following the Central Government’s move, the Administration of Jammu and Kashmir slashed VAT on petrol by ₹7 per litre.

Take a look at this table mentioned below that illustrates tax rates charged and additional components that make up the petrol price in Jammu and Kashmir:

Elements	Effective as of 21st October 2022 (in ₹ per litre)
Price charged to dealers	₹57.35 per litre
Excise duty (levied by the Central Government)	₹ 19.90 per litre
Average dealer commission	₹5.93 per litre
VAT (levied by the State Government)	₹17.36 per litre {20.87% of fuel price charged to dealers + excise duty + avg. dealer commission)} (an additional employment cess of ₹5 per litre and a reduction of 0.50 per litre is applicable)
Retail selling price of petrol at Jammu and Kashmir	₹100.54 per litre

(Note: The above table serves only as an example to explain the tax breakup for petrol in Jammu and Kashmir, with data taken from reliable and authorised sources as of 21st October 2022 . The actual prices, however, may vary as fuel price, dealer’s commission, cess and other such aspects change periodically.)

Who Levies Petrol Tax in Jammu and Kashmir?

The Central Government imposes excise duty (₹19.90 per litre) on petrol, while the Administration of Jammu and Kashmir levies VAT (approximately ₹17.36 per litre). These tax rates influence the petrol price in Jammu and Kashmir, apart from additional factors like dealers’ commissions, the price charged to dealers etc.

What Are the Factors Affecting Petrol Tax in Jammu and Kashmir?

Factors that affect the petrol tax in Jammu and Kashmir are stated below:

1. Price of Crude Oil

Crude oil is purchased from the international market, and any change in the price of crude oil globally directly affects the price of petrol in the domestic market.

Factors that change crude oi’s price are as follow:

International political relations
Demand and supply for crude oil
Future oil reserves and their supplies

2. Cost for Dealers

Oil Marketing Companies purchase and distribute crude oil, and based on the freight charges, expenses incurred on refining crude oil, etc., they levy a charge to dealers. This price charged to dealers is essential in determining the petrol price in India.

3. Excise Duty

The Central Government imposes excise duty on petrol. It is not a percentage but a fixed amount of money that remains constant irrespective of varying fuel and crude oil prices.

4. Sales Tax

Respective state governments impose VAT or sales tax on petrol after assessing excise duty, dealers’ commissions, etc. This tax rate charged by the state on petrol determines the petrol price in Jammu and Kashmir.

5. Demand and Supply of Petrol

Fewer refineries, higher input prices of crude oil, etc., often lead to a lower supply of petrol and fail to meet its increasing demand. This raises the petrol price in India.

6. Valuation of Indian Currency Against US Dollars

Crude oil is purchased from the international market, and the transaction is completed in dollars. Therefore, the exchange rate between Indian rupees and American dollars impacts the petrol price in the domestic market.

7. Dealers’ Commissions

Oil Marketing Companies pay a commission to petrol pump owners, which affects the petrol price in Jammu and Kashmir.

Is Petrol Tax Same in All Places of Jammu and Kashmir?

Yes, the Administration of the Union Territory imposes a uniform rate of VAT on petrol in Jammu and Kashmir. However, petrol prices may vary in respective places depending on the commission charged by dealers.

The additional relief on petrol tax in Jammu and Kashmir by the Administration reduced the petrol price by ₹12 per litre. However, petrol tax and its price are subject to change periodically; hence, keep an eye on the latest updates to avoid confusion later.

Frequently Asked Questions

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How much VAT did the Administration of Jammu and Kashmir impose on petrol before reducing it in November 2021?

The Administration of Jammu and Kashmir imposed a VAT of 24% and an employment cess of ₹5 per litre (plus a reduction of 0.50 per litre is applicable) on petrol before reducing it in November 2021.

Which Act confers the power on J&K to impose VAT on petrol?

Sections 3 and 3A of the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, Samvat 2005 confers the power on Jammu and Kashmir to levy sales tax on petrol.