Excise Duty Hike on Petrol, Diesel What It Means for You
The excise duty hike on petrol and diesel from April 2025 is expected to generate around ₹33,000 crore for the central government. While it strengthens revenue, the move also affects inflation, logistics costs, and fuel pricing for consumers and businesses.
Let’s break down what this hike means, how it works, and what professionals, businesses, and consultants need to watch for.
What is Excise Duty on Fuel?
Excise duty is a central tax levied on the manufacture of goods, including petroleum products. For petrol and diesel, it is collected by the central government and contributes significantly to non-GST revenue.
Key Points:
- Levied by: Central Government under the Central Excise Act, 1944
- Applies to: Petrol, diesel, and other fuels
- Collected at: Refinery or point of clearance
- Not under GST: Fuel is still outside GST scope as of 2025
Why the April 2025 Hike?
The government’s move to increase excise duty aligns with fiscal consolidation goals for FY 2025–26. According to reports, this revision could help the Centre mobilise over ₹33,000 crore, offering a boost to capital expenditure plans without increasing direct taxes.
Budgetary Context:
- Union Budget 2025 outlined higher capital spending targets
- Oil prices have been relatively stable, giving room for duty revision
- The hike is seen as a non-disruptive revenue strategy
Practical Impact of Excise Duty Hike
1. Fuel Prices May Rise
- While global oil prices remain stable, the excise duty hike could increase pump prices unless absorbed by OMCs (Oil Marketing Companies)
2. Inflationary Pressure
- Transportation costs could increase, affecting food and essential goods
- Industries relying on fuel-intensive operations may see input cost escalation
3. Business Impact
- Logistics, e-commerce, and manufacturing sectors could face margin pressure
- Input tax credit (ITC) not available on excise duties, as fuel is outside GST
Legal Basis and Compliance
- Excise Duty is governed by: Central Excise Tariff Act, 1985
- Hike notified via: Gazette Notification (check PIB/CBIC for latest)
- Oil remains outside GST: As per Article 279A, GST Council decides inclusion
- No ITC is available to businesses for excise on petrol/diesel
👉 Check CBIC’s official fuel taxation updates
Expert View: Tip for Businesses
Track monthly fuel usage and revise cost models quarterly.
Many SMEs ignore the cascading effect of non-creditable fuel taxes. Add a fuel surcharge in contracts to manage cost variability.
Summary
The April 2025 excise duty hike on petrol and diesel could earn the Centre ₹33,000 crore. While it aids fiscal health, it may raise fuel prices and affect logistics, inflation, and business margins, especially as fuel remains outside GST.
FAQs
Q1. Is the excise duty hike finalised?
Yes, it has been notified via an official government notification applicable from April 2025.
Q2. Will this impact GST returns or credits?
No. Fuel is not part of GST, so businesses cannot claim ITC on excise duty paid.
Q3. Can states also increase VAT on fuel?
Yes. States levy VAT separately and may revise rates in response to Centre’s move.