VAT on Petroleum Products - Compliance Services

State VAT and Excise Compliance for Petroleum Crude, Diesel, Petrol, Natural Gas, and ATF, Which Remain Outside GST

Five petroleum products - petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel (ATF) - continue to sit outside the GST framework, taxed instead through the older combination of Central Excise Duty and state VAT or Sales Tax. This was a deliberate, temporary carve-out under Section 9(2) of the CGST Act at the time GST was rolled out, pending a date to be notified based on the GST Council's recommendation, and that date has not yet arrived for these products.

For dealers, distributors, and businesses that consume large volumes of these products, this means running two parallel indirect-tax systems - GST for the rest of the business, and VAT/excise specifically for petroleum products, with no GST input tax credit available on the latter. Our services cover VAT registration, return filing, and representation for businesses navigating this dual structure.

Our VAT on Petroleum Products Services

VAT/CST Registration for Petroleum Dealers

Registration under the applicable state VAT Act for distributors, dealers, and retailers of petroleum crude, diesel, petrol, natural gas, or ATF.

VAT Return Filing

Preparation and filing of periodic VAT returns covering purchase, sale, and stock of petroleum products under the relevant state VAT Act.

Excise & VAT Compliance Advisory

Advisory for oil marketing companies, distributors, and dealers on the combined Central Excise Duty and state VAT compliance applicable to petroleum products.

Assessment & Audit Representation

Representation before state VAT and excise authorities during assessment, audit, or scrutiny of petroleum-related transactions.

Dual GST-VAT Compliance Support

Support for businesses that need to run GST compliance for their broader operations alongside separate VAT compliance for petroleum products.

Input Tax Credit Advisory for Downstream Users

Advisory for transport, logistics, and manufacturing businesses on the cost impact of not being able to claim GST input tax credit on non-GST petroleum products used as inputs.

Key Facts About VAT on Petroleum Products

Five specified petroleum products - petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel (ATF) - are kept outside GST under Section 9(2) of the CGST Act, pending a date to be notified on the recommendation of the GST Council
These products continue to be taxed through the pre-GST dual structure of Central Excise Duty (levied by the Centre) and VAT or Sales Tax (levied by the states)
VAT rates on petrol and diesel vary significantly by state, and together with central excise duty typically account for a large share of the retail pump price
Businesses using these petroleum products as inputs cannot claim GST input tax credit on them, since the products fall outside the GST chain - an important cost consideration for the transport, logistics, and manufacturing sectors
Dealers in petroleum products must maintain a separate VAT registration and comply with state-specific return filing and assessment procedures, in addition to any GST registration held for other business activities
Government statements have indicated that bringing petroleum products under GST is not planned in the immediate future, given the significant VAT and excise revenue these products generate for both state and central governments

Frequently Asked Questions

Which petroleum products are currently outside GST?

Five products remain outside GST: petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel (ATF). All other petroleum-related goods, such as lubricants and non-domestic LPG, are taxed under GST rather than VAT.

Can a business claim GST input tax credit on petrol or diesel used in its operations?

Generally, no. Since these products are outside the GST chain, GST input tax credit is not available on them even when they are used as inputs for an otherwise GST-registered business, such as fuel used in transport or manufacturing operations.

Do petroleum dealers need separate VAT registration?

Yes. Dealers, distributors, and retailers of petroleum crude, diesel, petrol, natural gas, or ATF must be registered under the applicable state VAT Act and file periodic VAT returns for these products, separately from any GST registration held for other goods or services.

Are all petroleum products excluded from GST?

No, only the five specified products - petroleum crude, high-speed diesel, petrol, natural gas, and ATF - are currently kept outside GST. Other petroleum-derived products, such as lubricants, greases, and non-domestic LPG cylinders, are taxed under GST.

Is there a timeline for bringing petroleum products under GST?

The GST Council has not fixed a date for including these five products in GST. Government statements have indicated that such inclusion is not planned in the near term, largely because of the substantial VAT and excise revenue these products currently generate for state and central governments.

Navigate Dual GST-VAT Compliance With Confidence

VAT registration, return filing, and representation for dealers and consumers of petroleum products still outside GST.