All About Petrol Tax in Sikkim

Source: deccanherald

As of July 2021, the petrol price rose to ₹100 per litre in Sikkim. To relieve Sikkim residents from these surging fuel prices, the State Government, following the Centre’s move of reducing excise duty on petrol, also lowered VAT on petrol, thereby lowering its price in the state. This article highlights crucial aspects of the petrol tax in Sikkim, which readers must be aware of.

The Central Government levies an excise duty (₹19.90 per litre) on petrol, while the State Government imposes VAT on petrol (approximately ₹17.29 per litre). These tax rates both influence the petrol price in the state, apart from additional factors such as crude oil’s price, dealers’ commissions etc.

Factors determining petrol tax in Sikkim are mentioned below:

1. Price of Crude Oil

Alteration in the price of crude oil in the international market due to global demand, changes in production rate and import, political relations etc., directly affect the petrol price in the domestic market.

2. Demand and Supply of Petrol

A higher number of vehicles on Indian roads is increasing, and so is the demand for petrol. However, oil refineries often fail to meet this rising demand due to a lower supply of petrol, resulting in increased petrol prices.

3. Cost for Dealers

Oil Marketing Companies levy a price to dealers to distribute crude oil after considering costs incurred on refining and freight charges, among other factors. This price charged is an essential component in determining the petrol price in Sikkim and applies to the entire country as well.

4. Dealers’ Commissions

Oil Marketing Companies provide commissions to petrol pump owners, which is a determining factor of petrol price in Sikkim and other states in India.

5. Sales Tax or VAT

Each state government levies VAT on petrol after assessing excise duty imposed by the Central Government, dealers’ commissions, etc. VAT on petrol differs with respective states. This VAT rate also adds up to the petrol price.

6. Excise Duty

The Central Government imposes excise duty on petrol. This amount of money remains constant irrespective of changing prices of fuel and crude oil. This tax rate on petrol determines the petrol price in India.

7. Valuation of Indian Currency Against US Dollars

Crude oil is imported from other countries, and the transaction is completed in dollars. Hence, the exchange rate between Indian currency and American dollars is an essential factor to consider while assessing petrol prices in India. For instance, if the valuation of USD rises against Indian rupees, it raises the purchasing price of crude oil and petrol in the domestic market.

Yes, the Sikkim Government imposes an equal rate of VAT on petrol in Sikkim. This implies that every Sikkim resident is liable to pay a similar tax rate on petrol in the state.

This is all about the petrol tax in Sikkim. Petrol tax and price may fluctuate periodically; hence, make sure to take a due note about the same.