Why VAT is charged on the excise duty
State VAT on petrol and diesel is levied on the price including central excise duty and the dealer's commission — not on the base price alone. That is why a one-rupee rise in excise raises the pump price by more than one rupee: the VAT rate applies to the higher base, and in a state charging 25% the customer pays ₹1.25.
It is also why the same base price produces materially different pump prices across state borders. The base price and excise are national; the VAT rate and any cess are not.
Petrol and diesel are outside GST
Five petroleum products — petrol, diesel, crude oil, natural gas and aviation turbine fuel — were kept outside the Goods and Services Tax when it was introduced, and continue to carry central excise duty and state VAT instead. Bringing them in requires a GST Council decision, which is why the question resurfaces periodically without changing anything.
For a dealer this has a practical consequence beyond the price: input tax credit does not flow the way it does elsewhere in the business. GST paid on things the outlet buys cannot be set against a fuel sale that carries no GST.
What the dealer actually keeps
Run your own figures through the calculator and the commission line is usually the smallest one on the page. That is the structural fact of fuel retailing in India: the pump collects a large sum per litre and keeps a small, fixed portion of it, with the great majority passing through to the exchequer and the oil marketing company.
It is the reason volume is the only real lever on gross margin, and the reason a rise in the retail price does not help the dealer — it raises the working capital tied up in every tanker load without changing the rupees per litre retained.
Frequently asked questions
Why does petrol cost different amounts in different states?
Because VAT and any state cess are set by each state separately, and they are charged on a base that already includes central excise and dealer commission. The base price and excise are the same across the country; the state levies are not, and they compound.
Will petrol come under GST?
It would require a GST Council decision. Petrol, diesel, crude oil, natural gas and ATF were kept outside GST at its introduction and remain so, taxed through central excise and state VAT instead.
Where do I find the current base price and excise figures?
The oil marketing companies publish the dealer purchase price, and central excise rates are set by the Union government and change with Budget announcements. This calculator deliberately asks for them rather than shipping a table that would be quietly wrong within a month.