No relief for common person, Gujarat earns over ₹18,000 cr a year from VAT on petrol-diesel

Amid rising fuel prices and increasing burden on consumers, the Gujarat government continues to earn more than ₹18,000 crore annually through VAT and cess collected on petrol and diesel sales across the state. According to figures cited by petroleum sector sources, Gujarat records an annual consumption of nearly 720 crore litres of diesel and 360 crore litres of petrol, taking the total yearly fuel consumption to around 1,080 crore litres.

Based on current retail fuel prices, Gujaratis reportedly spend nearly ₹97,920 crore annually on petrol and diesel purchases. Out of this, more than ₹18,000 crore goes to the state government in the form of VAT and cess. At present, the state levies around 17.7% VAT on petrol and 18.6% on diesel.

With petrol priced around ₹97 per litre and diesel around ₹93 per litre in Gujarat, a significant portion of the retail price directly goes towards taxes. Industry sources claim that approximately ₹17 to ₹18 per litre from fuel prices is collected by the government through VAT and cess.

The issue has once again come into focus amid the ongoing global fuel crisis and inflationary pressure on essential commodities. While the Centre had earlier reduced excise duty on fuel prices, the Gujarat government has not announced any fresh reduction in VAT since November 3, 2021.

Petrol dealers and industry observers believe that if the Gujarat government reduces VAT on fuel by around 4%, petrol and diesel prices in the state could decline by nearly ₹4 per litre, offering relief to consumers struggling with rising living costs.

The Gujarat government last reduced VAT in 2021, when fuel prices were cut by nearly ₹7 per litre following a reduction in central excise duty.

According to petroleum association sources, Gujarat’s yearly fuel consumption includes nearly 720 crore litres of diesel and 360 crore litres of petrol. With transport, logistics and daily commuting heavily dependent on fuel, industry experts say even a marginal reduction in VAT could significantly impact household and transportation expenses across the state.

At present, however, there has been no indication from the state government regarding any immediate cut in VAT or cess on petrol and diesel.