Excise Duty on Petroleum Products
Fiscal Significance
Excise duty (now Central Excise Duty / Union Excise Duty) on petroleum products is a major source of central government tax revenue and a key lever for managing the fuel price-fiscal trade-off.
- Petroleum products remain outside the Goods and Services Tax (GST) framework — petrol, diesel, ATF, natural gas, and crude oil are excluded from GST by mutual agreement of the GST Council (under Article 279A of the Constitution).
- This exclusion means the Centre and states retain significant discretion to levy their own excise and VAT on petroleum products, without GST Council approval.
- In May 2022, the Centre cut excise duty by ₹8/litre on petrol and ₹6/litre on diesel to combat the Russia-Ukraine oil shock; in March 2026, a ₹10/litre cut on both was announced.
- The March 2026 excise cut reduced central excise on petrol to ₹3/litre and eliminated it entirely on diesel.
- Fiscal cost of the 2026 cut: ~₹1.5 trillion, potentially widening the fiscal deficit by 40–45 basis points.
- States separately levy VAT on fuel — several states also cut VAT in 2022 to provide additional relief.
● Tracked since February 14, 2026 · last seen March 31, 2026 · updates as the daily brief publishes
31 Mar '26
Indian refiners face prospect of margin squeeze as govt reinstates export duties
Economics
27 Mar '26
Centre cuts excise duty for petrol to Rs 3/litre & zero for diesel amid global oil shock
Economics
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