India Keeps Petrol and Diesel Outside GST as Fuel Levies Hit ₹3.27 Lakh Crore

Summary

The Finance Ministry told the Rajya Sabha (21 July 2026) that it is“not the right time” to bring petrol, diesel, natural gas and ATF under GST, echoing the GST Council’s 2021 stance. [financialexpress.com], [a2ztaxcorp.net]
The Centre collected ₹3.27 lakh crore from excise, cesses and surcharges on fuel in 2025-26—up 10% year-on-year—despite a March 2026 cut of ₹10/litre on petrol and diesel that cost around ₹1 lakh crore. [financialexpress.com]
Fuel remains a vital revenue stream for both Centre (excise) and states (VAT); the government also raised export duties, lifting SAED on diesel exports to ₹15.50/litre and ATF to ₹14.50/litre. [financialexpress.com]

Article

India’s government has reaffirmed that petrol, diesel, natural gas and aviation turbine fuel will stay outside the Goods and Services Tax for now. Responding in writing to the Rajya Sabha on 21 July 2026, Minister of State for Finance Pankaj Chaudhary said the inclusion of petrol and diesel was discussed at the 45th GST Council meeting on 17 September 2021, but the Council felt it was not the right time—a position that still stands. He disclosed that the Centre collected ₹3.27 lakh crore from excise duty, cesses and surcharges on fuel and petroleum products in 2025-26, 10% higher than the prior year, even after a March 2026 reduction of ₹10 per litre each on petrol and diesel (annual revenue impact ~₹1 lakh crore) following the West Asia conflict’s spike in crude prices. The reluctance reflects fuel’s role as a major revenue source for both the Centre, through excise, and states, through VAT. The government also raised export levies, taking the Special Additional Excise Duty on diesel exports to ₹15.50/litre (from ₹8.50) and ATF to ₹14.50/litre (from ₹7.50), while cutting the petrol export duty to ₹2.50/litre.

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