The Central Government has extended the excise duty concession on Compressed Natural Gas (CNG) and formally introduced a specific excise entry for CNG blended with Biogas or Compressed Biogas (CBG).
The changes have been notified through Notification No. 02/2026–Central Excise, issued by the Ministry of Finance (Department of Revenue) in exercise of powers under Section 5A of the Central Excise Act, 1944. The notification will come into force from February 2, 2026.
Extension of Excise Duty Concession till 2028
One of the key amendments made through the notification is the extension of the sunset date for the existing excise duty concession. Wherever the year “2026” appeared in the provisos of the earlier notification, it has now been substituted with “2028”.
This effectively extends the concessional excise duty regime for an additional two years, providing long-term policy certainty to stakeholders in the clean fuel and gas distribution sectors.
New Excise Entry for CNG Blended with Biogas/CBG
The notification inserts a new Serial Number 9A in the table of the principal notification (No. 11/2017–Central Excise, dated June 30, 2017).
Under the newly inserted entry Tariff Heading: 2711 21 00 deals with the Compressed Natural Gas (CNG) when blended with Biogas or Compressed Biogas (CBG) and the Excise Duty Rate will be at the rate of 14%.
This is a notable development as it explicitly recognises CNG blended with renewable biogas as a separate category for excise purposes, aligning tax policy with India’s energy transition goals.
Clarification on Valuation for Excise Duty
To avoid valuation disputes, the notification provides a detailed Explanation clarifying how excise duty is to be computed for blended CNG.
For the purpose of excise valuation the value of blended CNG shall exclude the value of Biogas or Compressed Biogas (CBG) contained in the blend, and the amount of appropriate Central tax, State tax, Union Territory tax and Integrated tax already paid on such Biogas or CBG.
This clarification ensures that excise duty is levied only on the CNG component, preventing double taxation and easing compliance for fuel suppliers.
Explanation Added on “Appropriate Tax”
The government has also inserted Explanation 3 after Explanation 2 to remove ambiguity regarding the meaning of “appropriate Central tax, State tax, Union territory tax and Integrated tax”.
The explanation specifies that these taxes refer to Central tax under the CGST Act, 2017; State tax under the respective SGST Acts; Union Territory tax under the UTGST Act, 2017, and Integrated tax under the IGST Act, 2017
This clarification is expected to reduce interpretational disputes between taxpayers and tax authorities.
Amendment in Annexure Proviso
The notification further amends the proviso in item (b) of the Annexure by replacing the year “2026” with “2028”, mirroring the extension granted in the main table and reinforcing the long-term nature of the concession.
Notification Details
Notification No. 02/2026-Central Excise
Date: 01/02/2026
Read More: Centre Withdraws Excise Duty Exemption on CNG Blended With Biogas From February 2, 2026
