How Much Tax Is in 1 Litre of Petrol, Diesel & CNG in India & Worldwide Comparison
Understanding Fuel Taxes: How Much Tax You Pay per Litre of Petrol, Diesel & CNG
Published June 11, 2025 on cmaknowledge.in
Introduction
Every time you fill up your vehicle, you see the final price on the pump display. What’s less obvious are the layers of taxes, duties, and charges that make up that price tag. In India, the retail prices of petrol, diesel, and CNG include central government excise duties, state government value-added taxes (VAT), dealer commissions, transport charges and various local levies. These tax components alone can account for up to 60% of what you pay, depending on the fuel type and the state you are in.
The goal of this article is to demystify the composition of fuel prices by:
- Breaking down every tax and charge included in 1 litre of petrol, 1 litre of diesel, and 1 kilogram of CNG using Delhi as our benchmark
- Comparing these figures with the top 10 most expensive countries for petrol in 2025
- Discussing the rationale behind fuel taxation and how it affects government revenue, inflation, and environmental policy
- Exploring state-level variations within India
- Outlining future trends in fuel taxation, especially around cleaner alternatives like EVs and CNG
1. What Makes Up the Price of Petrol in Delhi?
Let’s begin with petrol. As of June 2025, the per-litre petrol price in the national capital region averages around ₹100. Here’s how that breaks down:
| Component | ₹ per Litre | % of Total |
|---|---|---|
| Base Price (Refinery to Dealer) | ₹45.00 | 45% |
| Central Excise Duty | ₹32.90 | 32.9% |
| State VAT (Delhi – 30%) | ₹23.25 | 23.3% |
| Dealer & Transport Charges | ₹1.85 | 1.8% |
| Total Retail Price | ₹100.00 | 100% |
Here, taxes (excise + VAT) account for 56.2% of the final pump price. This significant share underscores how critical fuel duties are to government finances.
2. Diesel Price Components in Delhi
Diesel is taxed at a lower rate compared to petrol, given its widespread use in commercial vehicles and agriculture. In Delhi, the diesel pump cost is roughly ₹90 per litre. Below is the itemized list:
| Component | ₹ per Litre | % of Total |
|---|---|---|
| Base Price (Refinery to Dealer) | ₹50.00 | 55.6% |
| Central Excise Duty | ₹31.80 | 35.3% |
| State VAT (Delhi – 16%) | ₹14.40 | 16.0% |
| Dealer & Transport Charges | ₹0.80 | 0.9% |
| Total Retail Price | ₹90.00 | 100% |
Combined diesel taxes stand at 51.3% of the retail price, still a substantial burden on transport operators and end consumers.
3. CNG Charges & Taxes in Delhi
CNG is outside the national GST regime, so its taxation is governed by state VAT and local surcharges. A kilogram of CNG costs around ₹80 in Delhi, broken down as:
| Component | ₹ per kg | % of Total |
|---|---|---|
| Base Price (City Gate to Station) | ₹68.00 | 85.0% |
| State VAT & Local Cess (10%) | ₹8.00 | 10.0% |
| Compression & Dealer Charges | ₹4.00 | 5.0% |
| Total Retail Price | ₹80.00 | 100% |
CNG taxes are lower in absolute terms, but given that CNG serves as a cleaner and cheaper alternative, every rupee saved helps commuters and fleet operators alike.
4. State-Level Variations Across India
While we’ve used Delhi as our benchmark, fuel VAT rates vary by state, affecting end prices. For example:
- Maharashtra: Petrol VAT 27%, Diesel VAT 13.5% – retail prices ~₹99 (petrol) and ₹88 (diesel)
- Tamil Nadu: Petrol VAT 30%, Diesel VAT 14.5% – retail prices ~₹101 (petrol) and ₹92 (diesel)
- Karnataka: Petrol VAT 25%, Diesel VAT 16% – retail prices ~₹97 (petrol) and ₹90 (diesel)
- West Bengal: Petrol VAT 30%, Diesel VAT 15% – retail prices ~₹102 (petrol) and ₹93 (diesel)
Such differences can shift overall tax burdens by 2-5 percentage points, illustrating how state policy influences fuel affordability.
5. Global Comparison: Top 10 Most Expensive Petrol Markets
How does India stack up? Below is a snapshot of 2025 petrol prices in some of the most expensive markets worldwide, converted to Indian rupees:
| Country | Local Price | ₹ Equivalent | Tax Share (%) |
|---|---|---|---|
| Norway | €2.00/L | ₹164 | 72% |
| Iceland | €1.85/L | ₹152 | 68% |
| Netherlands | €1.80/L | ₹148 | 67% |
| Italy | €1.75/L | ₹144 | 66% |
| Denmark | €1.72/L | ₹142 | 65% |
| United Kingdom | £1.50/L | ₹150 | 70% |
| France | €1.70/L | ₹140 | 65% |
| Germany | €1.65/L | ₹136 | 63% |
| Sweden | SEK 19.00/L | ₹141 | 64% |
| Finland | €1.68/L | ₹138 | 64% |
Most European prices exceed ₹140 per litre, with taxes contributing over two-thirds of the final cost. In India, while absolute prices are lower, taxes still represent more than half the pump price.
6. Why Fuel Taxes Matter
Fuel taxes serve multiple objectives:
- Revenue Generation: Excise and VAT on fuels contribute significantly to both central and state budgets, funding roads, bridges, public transport and social welfare schemes.
- Demand Management: Higher fuel taxes can temper consumption, helping reduce pollution and carbon emissions, and nudging consumers toward cleaner alternatives.
- Inflation Control: Fuel prices ripple through the economy; a change of even ₹1 per litre in diesel can alter overall inflation by up to 0.2%.
- Equity Considerations: Taxes on fuel often subsidize public transport and subsidized cooking gas (LPG), indirectly benefiting lower-income households.
7. Impact on Consumers & Businesses
For individuals, fuel comprises a chunk of monthly budgets, especially in cities with long commuting distances. High taxes push users toward carpooling, public transport, or even electric two- and four-wheelers.
For businesses—logistics, agriculture, manufacturing—diesel is a key input cost. A 10% rise in diesel prices can increase logistics costs by up to 5%, squeezing profit margins and potentially leading to higher consumer prices.
8. Future Trends & Alternatives
Policy shifts and technology are reshaping the fuel landscape:
- Electric Vehicles (EVs): Exemptions from registration fees and road taxes make EVs more attractive. Charging infrastructure expansion is underway in metro cities.
- Bio-CNG & PNG: Produced from organic waste, bio-CNG enjoys lower tax rates and reduces dependence on imported fossil fuels.
- Hydrogen: Under research and pilot projects, hydrogen fuel may see minimal excise duty to encourage early adoption.
- Possible GST Inclusion: Central government reviews ongoing whether to bring petrol and diesel under the GST regime to unify tax structures and reduce inter-state price disparities.
9. FAQs
Q: Why are diesel taxes lower than petrol?
A: Diesel is critical for commercial transport and agriculture. Lower taxes help keep goods prices and farm produce costs manageable.
Q: Will bringing fuels under GST reduce prices?
A: Inclusion under GST may streamline tax rates and lower inter-state variation, but final impact on price depends on the combined GST rate compared to current excise + VAT rates.
Q: How can I check daily pump prices in my city?
A: Official oil company websites (IndianOil, BPCL, HPCL) publish daily rates for petrol, diesel, and CNG by city and state.
10. Conclusion
Fuel taxes in India form a substantial part of pump prices: over half for petrol and diesel, and around 10% for CNG. While our prices remain lower than in many European nations, the share borne by consumers can still feel burdensome given average incomes. Understanding these components empowers you to make informed choices—whether it’s considering an EV, opting for public transport, or simply budgeting monthly expenses more accurately.
As India transitions toward cleaner energy sources and debates the future of fuel taxation—like GST inclusion—the landscape will continue to evolve. For now, knowing exactly what goes into each rupee at the pump can help you navigate fuel policies and their impact on your wallet.
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