Petrol at Rs 72, diesel at Rs 69 in Delhi? How GST could slash fuel prices in India

Crude oil prices have surged past $110 per barrel following the Iran conflict that began on February 28. Despite the global rally, retail fuel prices in India have remained unchanged since a ₹2 per litre cut in March last year. In Delhi, petrol is currently priced at ₹94.72 per litre, while diesel costs ₹87.62.

Across the country, petrol pumps continue to sell regular fuel at stable rates, even as prices in several global markets have risen by 30–50 per cent. So far, only premium petrol variants such as XP95, Power95 and Speed have seen a ₹2 per litre hike.

To cushion the impact of rising crude prices, the Government of India had earlier reduced excise duty by ₹10 per litre on both petrol and diesel. This has helped offset a portion of the losses being absorbed by public sector oil marketing companies (OMCs) — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — which continue to supply fuel below cost.


At current crude prices, under-recoveries are estimated at around ₹26 per litre on petrol and ₹81.90 per litre on diesel, with total daily losses of nearly ₹2,400 crore. Without these interventions, petrol prices could have risen to around ₹120 per litre and diesel to nearly ₹170.

Since the onset of the West Asia conflict, Brent crude has jumped from about $70 per barrel to nearly $122 — a sharp rise of around 75 per cent in under a month, driven by supply disruptions and geopolitical tensions.

One of the primary reasons for high fuel prices in India remains taxation. Petrol and diesel are currently outside the GST regime and are taxed through a combination of central excise duties and state VAT. These include Basic Excise Duty, Special Additional Excise Duty, Agriculture Infrastructure and Development Cess (AIDC), and state-level VAT — together accounting for over 50 per cent of the retail price.

If brought under GST, fuel would likely be taxed at a uniform rate, replacing the current layered structure.

In Delhi, the retail petrol price of ₹94.72 includes excise duty of ₹19.90, dealer commission of ₹3.77, and VAT of ₹15.39, all levied on a base price of ₹57.66 — taking the total tax incidence to nearly 68 per cent.

Following last year’s GST revamp, the system now operates with two primary slabs — 5 per cent and 18 per cent — while items such as tobacco, pan masala, aerated drinks and luxury goods attract a 40 per cent tax.

If petrol were taxed at 18 per cent GST, adding dealer commission of ₹3.77 to the base price of ₹57.66, the final retail price in Delhi would come down to approximately ₹72.49 per litre.

Even in a higher tax scenario of 40 per cent — similar to sin goods — petrol prices would still decline to around ₹86 per litre, compared to the current ₹94.72.

As per reports, in Delhi, the price charged to dealers for diesel is about ₹56.42 (including base price and freight), with excise duty at ₹15.80 and dealer commission at ₹2.58. VAT along with Air Ambience Charges adds another ₹12.82 per litre. If diesel were brought under the 18 per cent GST slab, its retail price in Delhi would drop to around ₹69–70 per litre, based on the current base price and dealer commission.


Disclaimer: The price calculations presented in this article are indicative and based on publicly available data and simplified assumptions, including current base prices and dealer commissions. Actual fuel prices under GST may vary depending on global crude oil rates, exchange rates, transportation costs, and any additional cess or levies imposed by the Centre or states.