Katerina Swanson
In Australia, the main fuel tax is an excise tax, to which a 10% goods and services tax (GST) is added. In some cases, businesses may be entitled to exemptions or rebates for fuel excise tax, including tax credits and certain excise-free fuel sources. In India, there is currently no GST on diesel, but the government and GST Council are yet to finalise any rate for petroleum crude, diesel, and natural gas.
| Characteristics | Values |
|---|---|
| Location | Australia, India |
| GST on diesel | No GST on diesel in India. GST on diesel in Australia is 10%. |
| GST on other petroleum products | Aviation Turbine Fuels: 5% GST. Petroleum oils and oils extracted from bituminous minerals: 18% GST. Any nature of petroleum gas: 18% GST. |
| Fuel tax rebate | Fuel tax credits are available for businesses in Australia. |
| Fuel tax rebate calculation | Calculated based on the date the fuel was delivered, not the date paid for. |
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What You'll Learn
GST on diesel in India
The Goods and Services Tax (GST) law was implemented in India in 2017. However, there is currently no GST being levied on diesel in India. The tax on diesel varies with every state/UT. There is an imposition of central excise duty on the base price and state VAT on the dealer’s commission.
Section 9 of the CGST Act states that GST on diesel, motor spirit, natural gas and aviation turbine fuel shall apply from a date that the government will notify. The government has not yet notified any date for levying GST on petroleum products. Article 279A of the Indian Constitution mentions that the GST Council has the authority to decide on the implementation of GST on diesel in India.
The GST Council is yet to finalise any rate for petroleum crude, diesel, and natural gas. From the discussions between the Centre and states at the GST Council meetings so far, a maximum GST rate of 28% could be levied on diesel along with cess. The consent of all state governments to bring diesel under GST is still being debated.
The latest GST Council Meeting was held on 17 September 2020, where the inclusion of diesel under the GST regime was discussed. However, the Finance Minister of India, Nirmala Sitharaman, announced that the council had decided that diesel could not be brought under the ambit of the indirect tax at that point in time. It is likely to take a long time to implement, as several states in India are against the implementation of GST on fossil fuels, including diesel. This is because the states are dependent on the revenue generated from the sale of these commodities.
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Fuel tax rebates in Australia
In Australia, fuel tax is collected as a tax on the production or importation of fuel, offset by a system of fuel tax credits (FTCs) for business users. The main fuel tax in Australia is an excise tax, to which goods and services tax (GST) is added. Both taxes are levied by the federal government. The GST (currently 10%) is applied on top of the fuel excise tax.
In some cases, businesses may be entitled to exemptions or rebates for fuel excise tax, including tax credits and certain excise-free fuel sources. For instance, businesses using fuel for purposes other than transportation receive a full refund of the fuel tax they have paid. There are also rebates that encourage the production and importation of clean fuels. For example, for 6 months from April 1 to October 1, 2022, the fuel excise was lowered or cut by 50% by the federal budget to 22.1 cents per litre for all road fuels.
FTCs are worth around 39% of the total tax collected. Three-quarters of FTCs are paid to businesses in the mining, transport, postal, warehousing, agriculture, forestry, and fishing industries. Fuel tax credit rates change regularly and are indexed twice a year – in February and August. The CPI indexation factor for rates from 3 February 2025 is 1.004.
The excise and customs duty on petroleum fuel (referred to here as fuel tax) is one of the oldest taxes in Australia, applying since Federation in 1901. For some time, there was a formal link between the amount of excise raised and road funding, but this ceased in 1992. Since then, fuel tax has been a general revenue-raising tax with only a minor link with the Australian Government’s overall level of road funding.
Petroleum gas attracts a GST of 18%. Aviation Turbine Fuels attract 5% GST if it falls under the HSN code 27101939.
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Fuel tax credits
In Australia, the main fuel tax is an excise tax, to which a 10% goods and services tax (GST) is added. The federal government levies both taxes. The GST is applied on top of the fuel excise tax. In certain circumstances, businesses may be entitled to exemptions or rebates for fuel excise tax, including fuel tax credits and certain excise-free fuel sources.
The Australian Fuel Tax Credits Scheme's second phase went into effect on July 1, 2008. All off-road business use of fuel became eligible for subsidies under this scheme. Businesses that do not operate large vehicle fleets but consume large amounts of fuel in business processes (such as mining, manufacturing, construction, and plant operations) became eligible for a fuel tax credit.
In the United States, fuel tax credits and refunds are also available for certain uses of fuel. For example, credits and refunds are available for aviation-grade kerosene sold for use on a farm or for use by state and local governments. Credits and refunds are also available for undyed diesel fuel or undyed kerosene sold for use by certain intercity and local buses. Additionally, the Inflation Reduction Act, enacted in August 2022, retroactively reinstated and extended various excise fuel incentive credits through December 31, 2024.
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Fuel excise tax
In Australia, the main fuel tax is an excise tax, which is levied by the federal government. A goods and services tax (GST) of 10% is added on top of the fuel excise tax. This means that all fuels are subject to a GST. However, there are some exemptions and rebates available for businesses. For example, businesses that do not run large vehicle fleets but consume large amounts of fuel in their business processes (e.g. mining, manufacturing) are eligible for a fuel tax credit. Additionally, there are grants and incentive schemes that provide tax credits and rebates for businesses or industries that rely heavily on fuel, such as transport and aviation.
In the United States, fuel excise taxes are administered at both the federal and state levels. At the federal level, the Internal Revenue Service (IRS) imposes a fuel excise tax on gasoline, diesel fuel, and other types of fuel. This tax is typically included in the price charged at the retail level. In addition to the federal fuel excise tax, many states also impose their own fuel excise taxes, which vary by state. For example, New York State has a motor fuel excise tax on motor fuel and diesel fuel sold within the state. Similarly, Massachusetts has a motor fuel excise tax on gasoline and diesel fuel, with a tax rate of $0.24 per gallon as of July 31, 2013.
In India, the Goods and Services Tax (GST) has been implemented, but it has not yet been levied on petroleum products such as petrol and diesel. Currently, there are no notifications or decisions made by the GST Council regarding the imposition of GST on these products. Instead, central excise duties and state VAT are charged on the sale of petrol and diesel. However, there are certain petroleum products used directly as raw materials in industries that attract GST, such as aviation turbine fuels, which attract a 5% GST if they fall under the HSN code 27101939.
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GST on diesel in Australia
In Australia, the main fuel tax is an excise tax, to which a 10% goods and services tax (GST) is added. This means that GST is applied on top of the fuel excise tax. In the case of diesel fuel, the excise tax is $0.442 per litre on ultra-low sulphur/conventional diesel. This is in addition to the 10% GST applied to all fuels in Australia.
The Australian fuel tax system includes various grants, incentive schemes, and rebates that apply to businesses or industries that rely heavily on the use of fuels, such as transport and aviation. These programs can provide tax credits and encourage the production and importation of clean fuels. For example, from April 1 to October 1, 2022, the federal budget lowered the fuel excise tax by 50% to 22.1 cents per litre for all road fuels. Additionally, businesses may be eligible for exemptions or rebates on the fuel excise tax, including tax credits and access to certain excise-free fuel sources.
It is worth noting that states in Australia do not levy any fuel taxes. Prior to 1997, several states used to charge fuel franchise fees, but these were ruled unconstitutional by the High Court of Australia, which determined that only the Commonwealth could levy such excise taxes. As a result, the federal government introduced a fuel excise tax and distributed the revenue to the states.
While the GST adds to the cost of diesel fuel in Australia, there are measures in place, such as incentives, rebates, and exemptions, that can help mitigate the tax burden, particularly for businesses and industries with high fuel consumption.
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Frequently asked questions
Yes, in Australia, diesel fuel is subject to a 10% GST on top of the fuel excise tax.
The GST Council is yet to decide on a rate for diesel and other petroleum products.
Fuel tax rebates are calculated based on the date the fuel was delivered, not the date it was paid for. The rebate can be claimed in the BAS period associated with the delivery date.
