Fuel blending . Centre puts off applicability of differential levy; Unblended petrol to cost more from November 1, diesel by April 1

Come November 1, unblended petrol will be costlier at least by ₹2 a litre while unblended diesel to see at least ₹2 hike from April 01. The Government has notified changes in the rate as announced in the budget with postponing date of implementation. This change will benefit both Centre and States.

Finance Minister Nirmala Sitharaman, while announcing Budget for Fiscal Year 2022-23, said “Blending of fuel is a priority of this Government.  To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of ₹2 a litre from the 1^st day of October 2022.”

Now a notification issued by Central Bureau of Indirect Taxes and Custom (CBIC) says that motor spirit commonly known as petrol which is intended for retail sale, not so blended with ethanol or methanol as conforming to Bureau of Indian Standards specifications from time-to-time for blended motor spirit will attract basic excise duty of ₹3.40 a litre for unbranded and ₹4.60 a litre for branded. For blended, basic excise duty for unbranded and branded will continue to be ₹1.40 and ₹2.60 a litre respectively.

The date of implementation for new rate will be November 1, added the notification.

Similarly, for “High speed diesel (HSD) intended for retail sale, not so blended with alkyl esters of long chain fatty acids obtained from vegetable oils, commonly known as bio-diesels as conforming to Bureau of Indian Standards specifications from time-to-time for blended diesel,” rate of basic excise duty will be ₹3.80 and ₹6.20 a litre for branded and unbranded respectively. New rates will come into effect from April 01, 2023.

For blended unbranded diesel, rate of basic excise duty will continue to be ₹1.80 a litre while for branded it will be ₹4.20 a litre.

States to benefit on hike in duty

Since basic excise duty is part of devolution pool, so any increase will boost the pool. This means, States will get more. Also, because of increase in basic excise duty, base for calculation of States’ sales tax will also get more weight, which in turn benefit the States. However, consumer will be required to pay more.

The notification has not cited reason for deferring the levy of additional differential excise duty, but it is believed that higher rate of inflation prompts the Centre to postpone the applicability.