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Guide · GST Rates

GST on Petrol & Diesel — Why Fuel Is Outside GST

Petrol, diesel, ATF, crude oil and natural gas are kept out of GST by the Constitution — so there is no GST and no Input Tax Credit on them. Here is the current tax structure, the ITC impact and where LPG, CNG and PNG do attract GST.

Written by
TaxClue Editorial Desk
Updated
18 August 2026
Reading time
5 min
Questions
15 answered
  • Updated for FY 2026-27
  • GST Expert Reviewed
  • Article 279A(5) Explained
Quick Answer

Petrol and diesel are NOT under GST. Along with crude oil, aviation turbine fuel (ATF) and natural gas, these five products are constitutionally kept outside GST under Article 279A(5) of the Constitution. They are still taxed through central excise duty + state VAT, so no Input Tax Credit is available on fuel — even for a GST-registered business. This was not changed by the GST 2.0 reform of 22 September 2025.

At a glance

Current Tax Structure on Petroleum & Gas

The five excluded fuels attract central excise plus state VAT; the related gases (LPG, CNG, PNG) are inside GST and follow the two-slab structure. Check the current schedule on the HSN/SAC rate finder before invoicing.

ProductTax RegimeUnder GST?ITC?
Petrol (motor spirit)Central excise + State VATNoNo
Diesel (high-speed diesel)Central excise + State VATNoNo
Aviation Turbine Fuel (ATF)Central excise + State VATNoNo
Crude oilCentral excise + royalty + State leviesNoNo
Natural gas (as a fuel)Central excise + State VATNoNo
LPG — domestic cookingGST5%Yes*
LPG — commercial / industrialGST18%Yes
CNG — used in vehiclesGST5%Yes
PNG / natural gas via CGD networkGST18%Yes

* Subsidised domestic cylinders are effectively cheaper; household users are not registered so ITC is not relevant. LPG/CNG/PNG (HSN 2711) stay inside GST — they are not among the five excluded fuels. Confirm the live rate on gst.gov.in.

No ITC on petrol or diesel for any business

Because petrol and diesel carry no GST, there is no GST to claim as Input Tax Credit. A transport firm buying diesel for its trucks, or a factory running diesel generators, absorbs the full fuel cost with no credit offset. This is a permanent feature of the current structure, not a temporary block.

The core reason

Why Petrol & Diesel Are Kept Out of GST

The exclusion is built into the Constitution and held in place by state revenue politics — not by any ordinary GST notification.

  • Constitutional design. The 101st Constitutional Amendment lists crude oil, motor spirit (petrol), high-speed diesel, ATF and natural gas as products on which GST will be levied only from a date the GST Council recommends — and no such date has been fixed.
  • State revenue dependence. State VAT on petrol and diesel funds a large share of many states' own tax revenue, so states resist folding it into a shared GST pool.
  • Central excise revenue. The Centre collects a large sum in fuel excise; replacing it with GST would force higher cesses to keep revenue neutral.
TaxClue Insight

Bringing petrol and diesel under GST needs a GST Council recommendation, not a Budget announcement. Until the Centre and states agree on a revenue-sharing mechanism, expect fuel to stay outside GST and the excise-plus-VAT structure to continue.

Who it hurts

ITC Impact — Sectors That Absorb the Cost

With no Input Tax Credit on petrol or diesel, fuel tax cascades into the price of goods and services across fuel-heavy sectors.

SectorFuelITCCost Impact
Road freight / truckingDieselNoDiesel is 40-50% of running cost — passed to shippers
AirlinesATFNoATF is a big share of ticket cost — raises fares
Manufacturing (DG sets)DieselNoCaptive-power cost cascades into product prices
Cab & logistics fleetsPetrol / DieselNoFuel tax embedded in per-km rates
Agriculture (diesel pumps)DieselNoDirect cost to farmers — usually unregistered

The service you sell may still carry GST — an airline charges 5% GST on economy tickets even though ATF has no ITC. See our note on blocked and unavailable credits.

Fuel with no ITC vs blocked credit — not the same thing

Petrol/diesel carry no GST, so there is simply nothing to claim. That is different from a blocked credit under Section 17(5), where GST is charged but the law disallows the credit. Both raise cost, but for different reasons.

Running a logistics, transport or manufacturing business? Get your GST & ITC position reviewed.

Talk to a GST Expert →
The hypothetical

What If Petrol Came Under GST?

If petrol and diesel were brought under GST, the Council would set a slab (and likely an additional cess to protect state revenue). At a headline GST rate, the pure tax on fuel could be lower than today's excise-plus-VAT — but a compensation cess would probably narrow the consumer benefit.

✓Potential upside

  • A single, transparent tax replaces excise + VAT
  • ITC could become available to registered businesses
  • Fuel prices could fall if no heavy cess is added
  • Uniform price signals across states

!Why it stalls

  • States lose a major independent revenue source
  • A compensation cess would offset much of the cut
  • Needs Council consensus, not just a Budget line
  • No agreed revenue-sharing mechanism yet
Where it stands

GST Council Stance in 2026

The GST Council has discussed petroleum inclusion several times and acknowledged the issue, but has repeatedly deferred any decision citing a lack of consensus among states. As of 2026, fuel remains outside GST with no notified timeline. The GST 2.0 rationalisation of September 2025 restructured goods/services rates but did not touch the constitutional exclusion of these five fuels.

Sources
  1. Constitutional bar: Article 279A(5), Constitution (101st Amendment) Act 2016
  2. Rates & notifications: gst.gov.in
  3. CBIC rate finder / HSN 2711: cbic-gst.gov.in
  4. Excluded fuels: petrol, high-speed diesel, ATF, crude oil, natural gas

Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.

People also ask

Questions, answered

Short, direct answers to the 15 questions readers ask most on this topic.

No. Petrol (motor spirit) is one of five petroleum products kept outside GST under Article 279A(5) of the Constitution. It is taxed through central excise duty by the Centre and VAT/sales tax by each state. GST will apply to petrol only from a date the GST Council recommends, which has not happened. This position was not changed by the GST 2.0 reform of 22 September 2025.

No. High-speed diesel is excluded from GST along with petrol, ATF, crude oil and natural gas. Like petrol, it continues under central excise plus state VAT. There is no GST rate on diesel and no Input Tax Credit is available on it.

Two reasons. First, the Constitution (101st Amendment) deferred GST on petrol, diesel, ATF, crude oil and natural gas to a date the GST Council must recommend — and it has not. Second, state VAT on fuel is a major, independent source of state revenue, so states resist moving it into a shared GST pool. Until the Centre and states agree on a compensation mechanism, inclusion stays deferred.

Petroleum crude, motor spirit (petrol), high-speed diesel, aviation turbine fuel (ATF) and natural gas. These are named in the Constitution as products on which GST will be levied only from a future date recommended by the GST Council. Related gases like LPG, CNG and PNG are NOT in this list and are taxed under GST.

No. The GST 2.0 rationalisation effective 22 September 2025 restructured goods and services into a two-slab system (5% and 18%, plus a 40% demerit rate), but it did not and could not change the constitutional exclusion of petrol, diesel, ATF, crude oil and natural gas. Those remain outside GST.

Petrol prices carry central excise duty levied by the central government plus state VAT (typically 25-35% of base price, varying by state), along with dealer commission. Because these are excise and VAT — not GST — no Input Tax Credit is available. This cascading of central and state taxes is exactly what GST was designed to replace, but fuel remains outside GST.

No. Since petrol and diesel carry no GST, there is no GST to claim as Input Tax Credit. A transport company buying diesel, or a manufacturer running diesel generators, cannot claim any credit — the fuel tax is a hard, embedded cost. Even a fully GST-registered business cannot recover it.

Yes. ATF is outside GST, but the air-travel service is inside GST — economy-class tickets are taxed at 5% and higher classes at a higher slab. The airline cannot offset the VAT it pays on ATF against the GST it collects on tickets, so that cascading cost is built into fares.

Not on the fuel itself — petrol and diesel sold at the pump carry excise and VAT, not GST. However, GST can apply to other supplies at the outlet, such as lubricants, a convenience store, or services. Petrol-pump operators often deal with both regimes; see our guide on GST for petrol pumps for the split.

Domestic LPG cooking-gas cylinders attract 5% GST, while commercial and industrial LPG attracts 18%. LPG is not among the five excluded fuels, so it is taxed under GST. Registered commercial users can claim ITC on commercial LPG; household users are not registered, so ITC is not relevant to them.

CNG used in vehicles is taxed at 5% GST as an incentive for cleaner transport fuel, while piped natural gas (PNG) and natural gas supplied through city-gas-distribution networks generally attract 18%. All fall under HSN 2711, and the applicable rate depends on the use. (Natural gas as a bulk fuel is still one of the five products constitutionally outside GST.)

Because LPG, CNG and PNG were never placed in the constitutional exclusion list. Only petrol, diesel, ATF, crude oil and natural gas (as a fuel) were deferred under Article 279A(5). Everything outside that list — including cooking gas and vehicle CNG — is taxed under normal GST rates.

If petrol were taxed under a GST slab, the pure tax could be lower than today's combined excise and VAT, which could reduce prices. But states would lose large VAT revenue, so the Council would likely add a compensation cess (as with tobacco or cars) that narrows the benefit to consumers. No cess or revenue-sharing formula has been agreed, which is why the change keeps stalling.

There is no notified timeline. The GST Council has discussed the idea repeatedly and courts have nudged it to decide, but the Council keeps deferring for want of consensus among states. As of 2026, petrol and diesel remain outside GST and no date has been recommended.

The GST Council. Under Article 279A(5), GST can be levied on petrol, diesel, ATF, crude oil and natural gas only from a date the Council recommends. It is a Council decision that needs broad Centre-and-state agreement — not something a single Union Budget can impose on its own.