The Indian government has reduced excise duty on petrol and diesel to mitigate the impact of rising global crude prices, triggered by geopolitical tensions in the Middle East. This move aims to provide relief to consumers and oil companies amidst volatile international oil markets.
The government has sharply reduced excise duty on petrol to 3 and diesel to zero, offering major relief to consumers. Here's how the price cut will impact fuel rates and inflation.
Analysts have sharply reduced cigarette maker ITC's earning estimates for the next two years, fearing a significant dent in the company's profitability and margins. This is owing to a steep hike in excise duty on tobacco by the government.
Finance Minister Nirmala Sitharaman on Monday introduced two bills in the Lok Sabha to levy excise duty on tobacco and tobacco products, and a new cess on manufacturing of pan masala, which will replace the GST compensation cess on such sin goods.
The Confederation of Indian Industry (CII) has urged the Indian government to gradually restore the Rs 10-per-litre cut in special additional excise duty on petrol and diesel over six to nine months. This move aims to relieve pressure on government finances as crude oil prices stabilise, without significantly impacting consumer sentiment.
Union excise duty collection dropped 18 per cent in August year-on-year at a time when the overall central tax kitty rose about 94 per cent before devolution to the states. The mop-up from Union excise duty declined to Rs 23,576 crore in August this year compared to Rs 28,816 crore in the same month a year ago. On the other hand, total tax collection rose to Rs 2.9 trillion in the month as against Rs 1.5 trillion in August 2022-23, shows the data released by the Controller General of Accounts (CGA).
The budgetary estimate for excise duty collection is Rs 1,36,610 crore (Rs 1,366.1 billion), which would translate into a growth of 8.8 per cent over last year. Chidambaram said problems in excise duty collection related to clandestine movements of goods and misuse of CENVAT credit.
Finance Minister P Chidambaram on Monday exempted scented supari from excise duty if it does not exceed 50 paise a packet.
In recent years, excise duty collections had always played truant to the expectations.
The Indian government has waived customs duty on critical petrochemical products until June 30 to ensure supply stability and provide relief to consumers amid disruptions caused by the crisis in West Asia.
The industry wants the excise duty on pesticides to be reduced to 4% from the current level of 8%. It also seeks radical cut in excise duty on Furnace oil to 4% from the current level of 16%.
An excise duty is a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country). It is a tax on the production or sale of a good. This tax is now known as the Central Value Added Tax(CENVAT).
GST will create a single, unified Indian market
The excise duty was increased on bulk drugs and intermediates from 8% to 10%, but fortunately the excise duty on formulations remains at 4%.
Finance Minister P Chidambaram expressed concern on Wednesday about the 'sizable' evasion of excise duties and asked corporates to pay their tax liabilities under this head on the lines of service and corporate income taxes.
India's Central government is likely to see its fertiliser subsidy bill double to a record 3.4 trillion in FY27, up from the Budget estimate of 1.7 trillion, due to surging global fertiliser prices exacerbated by the West Asia war. This significant increase, coupled with revenue losses from excise duty cuts for oil-marketing companies, is straining the government's fiscal space, though capital expenditure plans remain unchanged.
While in the case of bigger cars, the industry wants the distortion with smaller cars and the tax differentials to be narrowed, it wants duties to be reduced from 24%-27% to a uniform 22% irrespective of size of the vehicle and its engine displacement.
The government has put off by one month the levy of an additional Rs 2 per litre excise duty on petrol and diesel that is not doped with ethanol and bio-diesel in a bid to give the industry more time to implement the measure.
No change in retail prices as oil marketing firms to absorb increase
Ladakh Lieutenant Governor Vinai Kumar Saxena on Sunday approved a new Excise Policy, permitting the sale of hard liquor through retail vends, reducing documents to obtain a licence from 16 to six and extending the liquor availability to four more districts.
The recommendation to slash duty was made by the Bharatiya Janata Party to ease retail prices of petrol and diesel.
Excise duty on folders, file covers, manifold business forms & other articles of stationery, of paper or paperboard except notebooks and exercise books is being increased from 4% to 8%.
Justifying government's decision to impose excise duty on medicines based on maximum retail price, Finance Minister P Chidambaram on Tuesday told the Rajya Sabha that this would ensure transparency in collection of taxes.
Other core industries such as coal steel attract duty at around 5%. Cement is one of the core infrastructure industries and has limited manufacturing capacity in view of the expected GDP growth and projected demand for cement over the medium to long term.
Buckling under pressure, the government on Wednesday cut the excise duty on petrol and diesel by Rs 5 and Rs 10 respectively to bring down retail rates from record highs. The announcement comes on the eve of Diwali which will help bring down the skyrocketing prices of fuel and provide some relief to the common man battling inflation.
The Indian government has marginally exceeded its indirect tax collection target for fiscal year 2025-26, with strong performances in customs, excise, and GST revenues.
The Finance Minister has withdrawn excise exemption on 130 items and a nominal central excise duty of 1 per cent is being levied on these 130 items that are mainly in nature of consumer goods.
Delhi Police have arrested a 34-year-old man who had been absconding for three months in connection with the alleged abduction and assault of an on-duty excise department staffer.
Union Finance Minister Nirmala Sitharaman has warned that the ongoing West Asia crisis is not merely a geopolitical issue but will directly lead to higher fuel costs for common people and businesses, impacting shipping, input availability, and export orders.
The government's decision to impose excise duty on the maximum retail price of all drugs -- which took effect from January 8 -- may have an adverse impact on the domestic operations of drug makers, said analysts.
LG Electronics and Pentafour Industries are among the six companies whose premises had been raided for evasion of total central excise duty of Rs 1,159.35 crore (Rs 11,593.5 million) in 2002-03, Rajya Sabha was informed on Tuesday.
The domestic cigarette industry is expected to see a 6-8 per cent volume contraction next fiscal following the imposition of additional excise duties and increase in goods and services tax (GST) rates from February 1, Crisil Ratings said on Wednesday.
State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are reportedly incurring losses of Rs 18 per litre on petrol and Rs 35 per litre on diesel, as they continue to absorb rising crude oil costs without increasing retail prices. This situation is leading to expectations of a fuel price hike after upcoming state elections.
The excise duty cut will translate into a reduction of Rs 9.5 a litre on petrol and Rs 7 a litre in diesel after taking into account its impact on other levies.
Union Finance Minister Nirmala Sitharaman has urged an increased focus on '3Fs'-fuel, fertiliser, and forex-to maintain India's economic resilience amidst the West Asia crisis, while also criticising those who spread pessimism.
With the levy making unbranded fuel cheaper, consumers turn away OMCs plead in vain with finance, petroleum ministries.
Bank of Baroda economists project India's GDP to grow 6.5-6.8 per cent in FY27 but warn that the fiscal deficit could overshoot the budgeted 4.3 per cent target, potentially reaching 4.7-4.8 per cent of GDP due to subsidy overruns, excise duty cuts, and oil marketing company losses.
If excise duties are revised upwards, it will affect the FMCG sector, which is witnessing sequential rise in its input costs.
SIAM said excise duty must be lowered
