It is important to know about GST before understanding the concept of petroleum products under GST. The Goods and Services Tax (GST) came into force in India in July 2017[1]. The term GST is defined in Article 366 (12A)[2], which means “any tax on the supply of goods or services or both, except taxes on the supply of alcoholic liquor for human Consumption”[3]. To better understand the words ‘Goods’ and ‘Services’, let’s see the definition as given under the GST Act. Goods have been defined under Section 2(52) of the CGST Act, 2017[4] in which Goods means any kind of movable property other than money and securities but includes actionable claims, growing crops, grass, and things attached to or forming part of the land that are agreed to be served before supply or under the contract of supply. Service has been defined under Section 2(102) of the CGST Act, 2017[5] in which services means anything other than goods, money, and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency, or denomination, to another form, currency, or denomination for which a separate consideration is charged.

In this blog, we will critically analyze the types of petroleum products under GST, the exclusion of petroleum products, the reason behind them, and the benefits of including the products and their consequences on the Indian economy.

What are petroleum products? The five petroleum products are crude, petrol, high-speed diesel, natural gas, and aviation turbine fuel[6]. However, petroleum products have been excluded from the ambit of GST. These products continue to be covered under VAT (Value Added Tax), central excise duty, and central sales tax. Recently, there has been a growing debate in about whether petroleum products should be included under GST. The central government does not charge excise duty on natural gases but charges VAT on them. India has a rich reserve of natural gases; if natural gases come inside the ambit of GST it may result in a loss of revenue for the Government or become more expensive for the consumers as per the GST slaps rate (5%, 12%, 18%, 28%)[7].

Every state in India has different rates of petrol and diesel. Each State government of India levies VAT or sales tax on petrol after considering the dealer’s commission and Centre’s excise duty.


There are several reasons for the exclusion of petroleum products from GST.

  1. Loss of revenue: Petrol and diesel are major sources of revenue for both the state and central governments. If petrol and diesel come under GST, they can’t be expected to charge below or more than 28% at the current time, which results in a decrease in the price and will be sold at a cheaper rate[8].
  2. The burden on central government: Various state governments, such as Assam, are ready to include petroleum products under GST on the condition that the Central Government will compensate for the loss that occurs due to GST on petroleum, which will increase the burden on the Central Government if they include petroleum products.
  3. Inflation: Bringing petroleum under GST will result in a higher rate of inflation in the economy, which may lead to price fluctuations that also affect living costs.
  4. Difficulty in implementation: Petroleum products involve various complex tax structures, which would be complex and challenging.


The exclusion of petroleum products from GST has several impacts[9]:

  1. One nation one tax: The main objective of GST implementation for one nation, one tax will not come true.
  2. The cascading effect of taxes: The current taxation system of petroleum results in cascading taxes, which means taxes are levied on top of taxes at various stages of production and distribution, which leads to an increase in the price of the final product and makes it difficult for consumers to purchase it.
  3. Disadvantage for industries: Many industries rely on petroleum products as raw materials for production or for transportation, which leads to their higher production costs.


There are several benefits of including petroleum products under GST:

  • One Nation One Tax: The objective of GST for one nation one tax should truly be fulfilled; bringing the products will reduce the tax burden.
  • Reduce Tax Burden: The airline company’s taxes will be reduced, and they will also be entitled to an input tax credit[10].
  • Cascading effect: Another benefit of including petroleum products is that it will avoid the cascading effect of taxes.
  • Reduction in Price: Lower prices for consumers as the cascading effect of multiple taxes will be removed.
  • Benefits for Industries: Advantages for industries whose production and transportation rely on petroleum products.


According to Section 9 (2)[11] of the Central Goods and Services Tax Act, 2017, “the central tax on the supply of petroleum crude, high-speed diesel, motor spirit (petrol), natural gases, and aviation turbine fuel shall be levied with effect from the date as may be notified by the government on the recommendation of the council.”[12] It means that the government may include petroleum products under the ambit of GST someday, on the recommendation of the council.

Section 9 of the CGST Act states that GST on petroleum products can be charged from the date the government is notified. Further Article 279A of the Indian Constitution deals with the Goods and Services Tax Council, which includes that the Goods and Services Tax Council shall recommend the date on which the GST be levied on petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gases, and aviation turbine fuel[13].


A petition has been filed in the Kerala High Court by Kerala Pradesh Gandhi Darshanvedhi[14] about the different prices charged on petrol and diesel in various states because of the different tax rates levied by the state government, which affects the citizens as the price of goods also increases with the increase in fuel prices. The Kerala High Court asked the GST council to present reasons for not including petroleum under GST[15]. Later, the PIL was withdrawn after the court found some fault. The PIL was opposed by both the union and state governments.

To include petroleum products under GST, the government should make a proper framework for those that do not affect the Indian economy and should follow a systematic and divisional method between both the state and central government, which results in revenue loss for both governments.


Given the above, it can be said that including or excluding petroleum products under GST is a complex issue. Petroleum products involve various complex taxes, which make it complex and challenging to include in GST. The petroleum product generates revenue for both the central government, and state government thus helping to boost the Indian economy. There are several benefits of including petroleum products under GST such as a reduction in tax burden and, a reduction in price, etc. The inclusion of the products in the GST framework will have a side effect on the government while being a plus point for the citizens as they have to pay fewer taxes. The GST council should adopt a proper systematic framework to include petroleum products under GST to maintain a balance between fiscal interest and economic growth in the country.

Author(s) Name: Mahak Sahu (Lucknow University)


[1] Goods and Services Tax Council,<,18%25%2C%20and%2028%25 .> accessed on 4 September 2023

[2] Keshav Dayal, ‘GST Related Provisions in Constitution of India’ (2022) The Tax Guru <,2 > accessed on 4 September 2023

[3] Keshav Dayal, (n 2)

[4] National Academy of Customs, Indirect Taxes & Narcotics, ‘The Meaning and Scope of Supply’ (the CBIC,27 July 2017) < > accessed 4 September 2023

[5] National Academy of Customs, Indirect Taxes & Narcotics,(n 4)

[6] Prabhakar K S, ‘GST 2.0: Time for a reset?’ (The Deccan Herald, 02 July 2023) < > accessed on 4 September 2023

[7] Varun Singh, ‘GST on Petroleum, Natural Gases and Airline Turbinal fuel’ The Legal Service India < > accessed on 5 September 2023

[8]Ramesh Babu, ‘List reasons for not including diesel, petrol under GST’ The Hindustan Times (8 November 2021)  < > accessed on 4 September 2023

[9] CMA Dr. Sanjay R Bhargav, ‘Petroleum Products And GST’ (2021) Tax Bulletin, The Institute of Cost Accountants of India < > accessed on 5 September 2023

[10] Varun Singh (n 7)

[11] Kewal Garg, ‘Section 9 of CGST Act 2017: Levy and Collection’ (CA Club, 31 March 2023) <  > accessed on 5 September 2023

[12] Kewal Garg, (n 11)

[13] Annapoorna, ‘GST on Petrol and Diesel: Government plan, GST rate, and Price Comparison’ (The clear Tax 17 November 2022) < > accessed on 5 September 2023

[14]Kerala Pradesh Gandhi Vs Union of India (Kerala High Court) WP(C) No.12481, 21 June 2021

[15] Arpit Kulshrestha, ‘KL HC Declines Satisfy Reasons By Centre on Petroleum Products Under GST’ (SAG Infotech 2 December 2021) < > accessed on 6 September 2023