New Delhi, India: Petrol and diesel will soon be cheaper in Delhi, as Chief Minister Arvind Kejriwal announced on Wednesday that his government will lower the value-added tax (VAT) on fuel. After the Centre cut excise duty on fuels by Rs 5 last week, several states reduced VAT.

 Kejriwal said that the excise cut by the central government is insufficient. Overall taxes on petrol and diesel were reduced by 50 percent and 40 percent, respectively, after the Centre reduced excise duty on petrol. The federal government, along with several states, recently reduced excise duty and local sales tax or VAT, lowering fuel prices. The price of gasoline at the pump is determined by adding central excise, dealer commissions, and VAT to the price of crude oil. International benchmark crude oil prices plus freight rates make up basic oil prices.

According to price-build up of fuel available from state-run oil marketing companies, central excise was Rs 32.90 per litre and VAT was 30 percent in Delhi before recent cuts, bringing total taxes to 54 percent of end retail price of diesel. The central excise duty on diesel in Delhi was Rs 31.80 per litre, with 16.75 percent VAT and a Rs 250 per kilolitre air ambience charge bringing total taxes to 48 percent. Following a reduction of Rs 10 in excise duty, these taxes have fallen to 40 percent, and even lower in states that have reduced VAT.

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