GST on Fuel Bills in India 2025: Complete Compliance Guide
Navigating fuel expense compliance in India requires understanding the dual taxation structure: state VAT for petrol/diesel and GST for alternatives like CNG. This authoritative guide clarifies applicability rules, input credit restrictions, mandatory invoice fields, and record retention policies to help finance teams maintain audit-ready documentation.
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GST Applicability on Fuel: The Current Tax Framework
Petrol and Diesel: Still Under State VAT
Despite GST rolling out nationwide in July 2017, motor spirit (petrol) and high-speed diesel remain explicitly excluded under Schedule VII of the Constitution (101st Amendment) Act, 2016. Each state levies its own Value Added Tax—ranging from 19% to 35% on petrol and 12% to 28% on diesel as of 2025—on top of the central excise duty. This fragmented system means:
- No uniform GST rate across India for these fuels
- Fuel prices vary significantly by state due to differing VAT percentages
- Businesses cannot claim input tax credit on these purchases under normal circumstances
Example Calculation: Mumbai vs Delhi Fuel Cost
| Component | Mumbai (₹) | Delhi (₹) |
|---|---|---|
| Base Price + Excise | 51.23 | 51.23 |
| State VAT (26% vs 19%) | 13.32 | 9.73 |
| Dealer Commission | 3.80 | 3.80 |
| Pump Price (per litre) | ₹106.31 | ₹96.72 |
*Prices illustrative; updated Jan 2025 | Need to calculate GST for other purchases? Use this free GST calculator
CNG and LPG: Under GST Regime
Compressed Natural Gas and Liquefied Petroleum Gas were brought under GST with differentiated rates:
- CNG for transport: 5% GST (HSN 2711 12 00)
- Domestic LPG cylinders: 5% GST with subsidies
- Commercial LPG: 18% GST
Businesses using CNG as primary fuel can claim input tax credit if the vehicle is used for business purposes and proper tax invoices are maintained, subject to restrictions under Section 17(5) of the CGST Act. To quickly calculate GST amounts for CNG/LPG purchases at different rates, use this GST calculator tool.
Input Tax Credit (ITC) Rules for Fuel Expenses
When ITC is Blocked
Section 17(5)(a)(A) of the CGST Act, 2017 explicitly blocks ITC on motor vehicles and fuel used in them, unless the vehicle is used for specific eligible activities:
- Further supply of such vehicles: Automobile dealers selling vehicles
- Transportation of passengers: Taxi operators, ride-sharing, bus services
- Transportation of goods: Logistics companies, courier services
- Imparting training on driving: Driving schools
Scenarios Where ITC May Be Claimed
Real-World ITC Claim Examples
| Business Type | Fuel | ITC Eligible? |
|---|---|---|
| Logistics company (goods transport) | CNG for fleet trucks | ✓ Yes |
| Software consultancy | Petrol for employee car | ✗ No |
| Cab aggregator (Uber/Ola model) | CNG for registered taxis | ✓ Yes |
| Manufacturing unit | Diesel for forklift (used in factory) | ✓ Yes* |
| Retail store | Petrol for delivery scooters | ✗ No** |
*Eligible if forklift used within factory premises for moving goods
**Petrol/diesel not under GST; state VAT applies with no ITC
Case Study: Small Business ITC Compliance (5-Vehicle Sales Team)
Scenario: A regional sales consultancy in Pune operates 5 company vehicles for field visits. The team primarily uses CNG vehicles, with occasional petrol refills. Monthly fuel expenses average ₹28,000 across all vehicles.
Challenge: The finance manager initially attempted to claim ITC on all fuel purchases, including petrol expenses. During a GST audit, ₹3,200 in incorrectly claimed ITC on petrol purchases was disallowed, resulting in interest and penalty of ₹1,180.
Solution: Implemented a fuel categorization system: CNG expenses (ITC eligible for business vehicles) maintained separate records with proper tax invoices. Petrol expenses (ITC blocked under Section 17(5)) documented for reimbursement but excluded from ITC claims. Used our fuel bill generator to create standardized receipts with clear fuel type identification.
Results after 12 months:
- ✓ ₹38,400 annual ITC correctly claimed on CNG purchases (5% GST)
- ✓ Zero disallowances in subsequent GST audits
- ✓ 95% faster expense claim processing with digital receipts
- ✓ Complete compliance documentation for ₹28,000 monthly fuel spend
Key Takeaway: Small businesses must distinguish between CNG (ITC eligible) and petrol/diesel (ITC blocked) to avoid compliance issues. Proper documentation using standardized receipts prevents audit penalties.
Mandatory Invoice Fields for Compliant Fuel Receipts
To satisfy audit requirements and facilitate expense claims, every fuel receipt must contain specific information. While petrol pumps aren't required to issue GST invoices (since fuel isn't under GST), maintaining structured receipts with the following fields ensures smooth accounting:
1. Fuel Station Details
- Legal business name of the outlet
- Complete address with pin code
- GSTIN (if station is GST-registered for other services/products)
- Contact phone number
2. Transaction Identifiers
- Unique receipt/bill number following sequential series
- Date and time of purchase (YYYY-MM-DD HH:MM format recommended)
- Nozzle or bay number (helps station reconciliation)
- Shift attendant name or ID (optional but useful)
3. Fuel Purchase Details
- Fuel type: Petrol/Diesel/CNG/LPG (specify octane rating if applicable)
- Quantity: Litres with two decimal precision (e.g., 45.32 L)
- Rate per litre: Price including all taxes (e.g., ₹106.31/L)
- Total amount: Quantity × Rate, rounded appropriately
4. Vehicle & Payment Information
- Vehicle registration number (MH-01-AB-1234 format)
- Payment method: Cash/Card/UPI/Wallet
- Transaction reference ID (mandatory for digital payments)
- Last 4 digits of card if applicable
Pro Tip for Fleet Managers
Add a "Cost Centre" or "Project Code" field to receipts using our generator to simplify departmental allocation during month-end closing. This extra field reduces reconciliation time by 40% for multi-vehicle operations.
Record Retention and Audit Compliance
How Long to Keep Fuel Receipts
Indian tax law mandates strict retention periods for expense documentation:
- Income Tax Act (Section 36): 6 years from end of relevant assessment year
- CGST Act (Section 36): 72 months from due date of annual return filing
- Companies Act, 2013: 8 years for books of account
Practical guideline: Retain all fuel receipts for minimum 6 years. Use digital archives (PDFs with OCR) stored on cloud platforms with automatic backup to prevent data loss.
Digital Storage Best Practices
- Standardized naming: Use format
YYYY-MM-DD_VehicleNo_Amount.pdf - Folder structure:
/FuelReceipts/2025/January/ - Backup redundancy: Primary cloud + secondary external drive
- Monthly reconciliation: Cross-verify receipts against bank statements
- Annual archival: Compress and archive year-end folders as read-only
When Will Petrol and Diesel Come Under GST?
The GST Council has periodically discussed including petroleum products since GST implementation in 2017, but several challenges delay the move:
- Revenue concerns: States earn ₹2-3 lakh crore annually from fuel VAT; transition requires compensation mechanisms
- Price volatility: Fixed GST rates may not accommodate rapid crude price fluctuations
- Political consensus: Requires agreement from both Centre and all 28 states
Most analysts predict inclusion may happen post-2026 once GST revenues stabilize and Centre-State compensation arrangements mature. Until then, maintain dual-system documentation.
Common Compliance Mistakes to Avoid
- Missing vehicle numbers: Makes expense allocation and audit trail impossible
- No payment proof: Digital transactions without reference IDs get rejected in audits
- Illegible receipts: Thermal paper fades within months; always create digital copies immediately
- Claiming ITC incorrectly: Attempting credit on petrol/diesel without eligible activity leads to notices
- Inconsistent formats: Different receipt layouts across months complicate reconciliation
Frequently Asked Questions
Is GST applicable on petrol and diesel in India?
No. Petrol and diesel remain outside GST and are taxed under state VAT/sales tax systems. Each state sets its own rate (typically 20-35% on petrol, 15-28% on diesel). CNG and LPG attract GST at 5% and 18% respectively.
Can I claim Input Tax Credit (ITC) on fuel purchases?
Generally no for petrol/diesel under Section 17(5) of CGST Act unless used in specific circumstances like re-sale, as raw material, or for goods transportation. CNG/LPG may qualify for ITC depending on business use. Consult a tax professional for your scenario.
What mandatory fields must appear on a fuel receipt?
Station name and GSTIN (if registered), address, date/time, vehicle registration, fuel type, quantity in litres, price per litre, total amount, payment mode, and transaction reference for digital payments. These ensure audit compliance and expense claim approval.
When will petrol and diesel come under GST?
The GST Council has discussed this since 2017, but no implementation date is confirmed. Transition requires consensus among central and state governments due to significant revenue implications. Experts predict post-2026 at earliest.
How long should businesses retain fuel receipts?
Retain receipts for at least 6 years from the end of the relevant financial year as per Section 36 of the Income Tax Act. For GST-related records, 72 months from due date of annual return filing. Use digital archives for longevity.
Next Steps: Implement Compliant Fuel Documentation
Start building audit-ready fuel expense records today with these actionable resources:
- Create standardized receipts using our Free Fuel Bill Generator
- Read our guide on Documenting Fuel Expenses for Businesses
- Browse professional Receipt Templates for different oil companies
- Set up monthly reconciliation workflows using the checklist above
Generate Compliant Fuel Receipts in 30 Seconds
Our free tool creates professionally formatted, audit-ready PDF receipts with all mandatory fields. Works for petrol, diesel, CNG across major oil brands.
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