Different Types of Taxes on Petrol in Karnataka

The Central Government and Karnataka Government levy taxes on petrol. As per the latest decision of the centre, the Karnataka State Government have reduced the Value Added Tax (VAT) on petrol to 25.9% from 35%. The prices may change periodically depending upon the fluctuation in taxes.

Petrol Prices Without Tax

Who Levies Petrol Tax in Karnataka?

The centra excise duty is levied by the Central Government. On the other hand, the state governments levy the VAT on petrol. However, the VAT varies from state to state.

What are the Factors Affecting Petrol Tax in Karnataka?

Given below are the factors which affect the petrol tax in Karnataka:

Crude Oil Price

A global change in the prices of crude oil impacts the rate of diesel and petrol across India. Some of the factors which affect the crude oil prices are:

1. Geo-political factors
2. Demand and supply of fuel
3. Future oil reserves and supply

Dealers' Commissions

The Oil Marking Companies like IOCL, HPCL etc need to pay commissions to the owners of petrol pumps. The commission constitutes their profits, income, and other costs. This dealer's commission also affect the petrol prices across the Karnataka state.

Cost of Dealers

The oil marketing companies distribute fuel in exchange of which they charge a price to dealers. This price has been decided based on certain factors like refining costs, freight charges, etc.

Demand and Supply

The rise in the rate of purchasing vehicles hiked the demand for diesel and petrol. There are times when the supply of crude oil reduces which can lead to the fluctuations of crude oil prices. 

All these things lead to the imbalance of demand and supply equilibrium. So, according to the law of economics, rise in the demand and lower supply may increase the fuel prices. 

Central Excise Duty and Sales Tax of States

Central government sets central excise duty. Thus, it is not subject to the fluctuations irrespective of changes of crude oil prices. On the other hand, the VAT or sales tax varies from state to state. Certain factors like dealer' commission, crude oil prices, others determine the VAT or state government's sales tax. 

Value of Indian Rupee Against US Dollar

The global market supplies crude oil and the transaction is made in US dollars. So, the fluctuations in dollars valuation impact the Indian rupees. 

Is the Petrol Tax Same in All Places in Karnataka?

The petrol tax is same in all places in Karnataka. The state imposes a uniform statewide tax of 25.9%. So, the customers across the Karnataka state have to pay the same tax percentage on the current petrol prices. So, the petrol prices may vary in different cities due to the difference in dealer's commission.