All About Petrol Tax in Tamil Nadu

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

The central government recently reduced the excise duty on petrol by ₹5 per litre. However, Tamil Nadu, among several other states, is not ready to reduce VAT on petrol.

Therefore, it continues to levy 15% of VAT on petrol. The last time Tamil Nadu revised VAT on petrol was in August, when it reduced the same by ₹ 3 per litre.

Interested to know more details about the petrol tax in Tamil Nadu?

Continue reading!

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What Is the Petrol Price and Tax Structure in Tamil Nadu?

Apart from Tamil Nadu Vat on petrol, several factors affect petrol's price in this state.

Take a look at the table given below summarising components that affect petrol's final price -

Elements	Effective as of 21st October (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	₹14.68 per litre
VAT (Levied by the State Government)	₹11.95 per litre {13% of (fuel price charged to dealers + excise duty + avg. dealer commission)}
Retail selling price at Tamil Nadu	₹103.88 per litre

(Note: The above table serves as an example to explain the petrol tax breakup, with data taken from reliable and authorised sources, as of 27th Jan 2022. The actual prices, however, may vary as fuel price, dealer’s commission, cess and other such aspects change periodically. Check the latest petrol prices in Tamil Nadu)

Who Levies Petrol Tax in Tamil Nadu?

The state government levies VAT on petrol and diesel in Tamil Nadu. Similarly, each state government in India, after determining the central excise duty, dealer's commissions etc., imposes VAT on fuel. Thus, VAT changes with each state.

Over the last 15 years, VAT on petrol comprises approximately 12.5% to 16% of Tamil Nadu's tax revenue. Thus, reduction of VAT on fuel may result in lower revenue collection.

What Are the Factors Affecting Petrol Tax Prices in Tamil Nadu?

Note the following important factors that affect the price of petrol in Tamil Nadu -

1. Price of Crude Oil

Changes in demand and supply of crude oil affect its price. Moreover, international politics and future oil reserves and their supply also significantly affect fuel prices.

India imports a substantial proportion of crude oil from the international market. Accordingly, the country has to bear the increasing global price of crude oil, which directly affects the petrol and diesel tax in Tamil Nadu.

2. Demand and Supply of Fuel

The increasing number of automobiles on Indian roads increased the demand for petrol as well. The Indian oil refinery companies obtain crude oil from the international market. However, often it's supply falls short in the face of increasing demand. Thus, according to the law of economics, fuel price also increases and vice versa.

3. Value of Indian Rupees Against US Dollars

The international market supplies crude oil. This transaction is done in US dollars. Thus, any change in its value affects the valuation of Indian rupees. The higher the dollar's value, the higher is the purchasing cost of crude oil. This implies that the price of finished product, that is petrol, will also be higher and vice versa.

4. Availability of Refineries

The crude oil is sent to refineries to process it into petrol. If there are fewer refineries, there will be less fuel supply against its increasing demand. Accordingly, fuel prices will increase.

5. Central Excise Duty and VAT

Both VAT and excise duty affect the price of petrol in Tamil Nadu. Before the current arrangement to reduce taxes, approximately 52% of petrol price constitutes taxes. This makes it difficult for Indian motorists to bear this higher cost of purchasing petrol.

Is the Petrol Tax Similar Across Cities in Tamil Nadu ?

Yes. Petrol state tax in Tamil Nadu is similar across all its cities. However, petrol prices may vary based on differences in dealer's commission and other factors in cities. For example, the petrol price in Ariyalur is ₹102.37 per litre as of 9th November. At the same time, it is ₹101.89 in Coimbatore.

Keep an eye on regular updates about petrol tax in Tamil Nadu as it is subject to change due to changes in the factors mentioned above.

Frequently Asked Questions

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Does the dealer's commission affect the petrol tax in Tamil Nadu?

The OMCs pay a commission to the fuel dealers. This commission covers their profit, cost and earnings and directly affects fuel's price and VAT in Tamil Nadu.