The Ministry of Finance has issued a series of notifications introducing sweeping changes to the central excise duty structure on petrol, diesel, and aviation turbine fuel (ATF). The amendments, notified through multiple changes to the Central Excise Rules and related notifications, come into force with immediate effect and aim to recalibrate taxation on fuel products while tightening export-linked benefits.

The government, exercising powers under the Central Excise Act, 1944 and the Finance Acts of 2002, 2018, and 2021, has simultaneously altered duty rates, restricted certain exemptions, and introduced fresh levies—particularly on aviation fuel.

A key highlight of the amendments is the exclusion of motor spirit (petrol), high-speed diesel (HSD), and ATF from the benefits available under Rules 18 and 19 of the Central Excise Rules, 2017. These rules typically allow for rebate of duty on exports or removal of goods without payment of duty.

The newly inserted provisos clarify that such benefits will no longer apply to these petroleum products, except in limited cases where exports are undertaken by public sector oil companies to neighboring countries including Nepal, Bhutan, Bangladesh, and Sri Lanka. 

This move effectively narrows the scope of export-linked incentives and signals a tighter regulatory approach toward fuel exports.

Through Notification No. 05/2026-Central Excise, the government has amended earlier rate structures, setting excise duty at ₹3 per litre for certain categories, while prescribing ‘Nil’ rates for others. Notably, the notification also clarifies that these provisions will not apply to goods cleared for export. 

In another key change, the government has capped the special additional excise duty on petrol at ‘Nil’ and on high-speed diesel at ₹18.5 per litre. These rates are applicable subject to conditions, including exclusions for export transactions and specific exports by public sector oil companies. 

Further, additional excise duty on diesel has been limited to ₹3 per litre under separate amendments linked to the Finance Act, 2018 framework.

₹50 Per Litre Levy Introduced on Aviation Turbine Fuel

One of the most impactful changes is the introduction of a special additional excise duty of ₹50 per litre on aviation turbine fuel (ATF). This levy has been inserted into the Eighth Schedule of the Finance Act, 2002, marking a substantial increase in the tax burden on aviation fuel. 

However, this increase is accompanied by a parallel exemption notification capping the effective duty on ATF at ₹29.5 per litre, thereby softening the overall tax impact. Additionally, a separate notification grants full exemption from special additional excise duty on ATF, subject to conditions—particularly excluding exports other than those made by public sector oil companies to select neighboring countries. 

Export-Oriented Relief Retained

Despite tightening domestic duty benefits, the government has retained incentives for export-oriented operations. Petrol, diesel, and ATF supplied for export or as fuel to foreign-going aircraft are exempted from basic excise duty and Agriculture Infrastructure and Development Cess, reinforcing India’s export competitiveness in the fuel supply chain. 

Rescission of Earlier Notification

In a clean-up measure, Notification No. 18/2022-Central Excise has been rescinded, indicating a shift away from earlier policy frameworks and aligning the regime with the latest fiscal priorities.

Customs Duty Relief on ATF Imports

Complementing the excise changes, the government has also issued a customs notification granting full exemption from additional customs duty on imported ATF, where such duty is equivalent to the special additional excise duty. This is expected to ease input costs for aviation players relying on imported fuel. 

Read More: ICAI Plans New Course to Strengthen MSME Support Ecosystem, Launch Expected by July