The impact of GST 2.0 on fuel is one of the most significant reforms from the 56th GST Council’s meeting, reshaping how energy, transport, and everyday essentials are taxed.
While many expected a direct cut in petrol, diesel, and LPG prices, these fuels remain outside the GST’s scope.
Instead, the latest GST council meeting focused on sweeping changes in coal, biodiesel, pipelines, vehicles, and agricultural fuels, altering costs that eventually ripple through households and businesses alike.
This will indirectly touch the fuel usage of every household and business. Read on to learn what the impacts of GST 2.0 on fuel are and how it will affect the Indians.
GST 2.0 Rates on Coal, Lignite & Peat
Coal and related solid fuels will be facing a fresh set of rules under GST 2.0.
The change in GST rates of solid fuels like coal, lignite and peat has been increased.
Industries that rely on them for power and households in coal-dependent regions will also experience the change in rates due to the latest GST update on fuel.
Here is an overview of the GST 2.0’s impact on coal, lignite and peat:
| Goods | Old GST | New GST |
|---|---|---|
| Coal; briquettes, ovoids & similar solid fuels | 5% | 18% |
| Lignite (whether or not agglomerated) | 5% | 18% |
| Peat (including peat litter, agglomerated or not) | 5% | 18% |
The update makes coal-driven energy costlier, likely raising electricity costs and affecting industrial output, which in turn influences consumer prices
Read on: Upcoming GST Reforms in India
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GST 2.0 and Renewable Energy
Among all the impacts of GST 2.0 on fuels, biodiesel has been restructured to align with environmental and policy goals.
While it may become pricier outside blending programmes, the update signals the government’s intent to streamline green energy under the simple tax regime.
By aligning biodiesel and other non-conventional fuels under the restructured tax system, GST 2.0 changes signal support for renewable energy adoption while striking a balance between fiscal needs.
| Goods | Old GST | New GST |
|---|---|---|
| Biodiesel (excluding supply to OMCs for HSD blending) | 12% | 18% |
| Renewable energy devices & solar panels/photovoltaic cells | 12% | 5% |
Consumers and small-scale industries relying on biodiesel could see higher costs, but it sets a pathway for cleaner fuel integration. Keep in mind that the government is aiming for longer-term benefits.
Impact of GST 2.0 on Nuclear & Petroleum Operations
The latest GST update also includes special provisions for nuclear fuel elements and petroleum operation goods. Nuclear energy inputs are placed under a lower rate, while petroleum exploration goods move into a higher bracket.
By keeping them under merit rates, GST 2.0 changes ensure strategic energy security is maintained without overburdening essential exploration and production.
Here is the impact of GST 2.0 on nuclear and petroleum fuel operations:
| Goods | Old GST | New GST |
|---|---|---|
| Fuel elements (cartridges), non-irradiated, for nuclear reactors | 12% | 5% |
| Goods for petroleum operations under specified licences/contracts | 12% | 18% |
These reforms support India’s long-term energy independence and exploration initiatives, reinforcing industrial growth.
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New GST Rates on Fuel Dispensing Pumps
Fuel pumps and lubricating systems, vital for stations and garages, fall under a simplified structure in the latest GST Council meeting. That means the rates have been reduced, flagging a sense of relief for manufacturers.
This will help align fuel infrastructure with the broader GST amendments designed for efficiency. Take a look at the GST 2.0 rates on fuel dispensing pumps:
| Goods | Old GST | New GST |
|---|---|---|
| Pumps for dispensing fuel/lubricants (filling stations/garages) | 28% | 18% |
| Fuel, lubricating or cooling medium pumps (ICE) | 28% | 18% |
The move reduces capital costs for fuel retailers and auto service providers, ultimately improving logistics affordability.
Suggested Read: Impact of New GST Reforms on Common People
Latest GST Rates on Transportation of Fuels via Pipelines
Pipeline transport of crude oil, natural gas, and refined fuels has been realigned in the latest GST notification.
The dual structure (with and without ITC) reflects the government’s effort to balance fiscal discipline with operational ease. Here is an overview of the GST 2.0 rates on the transportation of fuels via pipelines:
| Goods/Services | Old GST | New GST |
|---|---|---|
| Transport of natural gas, petroleum crude, motor spirit, HSD or ATF via pipeline (without ITC) | 5% | 5% |
| Transport of natural gas, petroleum crude, motor spirit, HSD or ATF via pipeline (with ITC) | 12% | 18% |
This directly benefits large-scale distributors and indirectly ensures more stable supply chains for consumers.
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GST 2.0 on Fuel and Indirect Impact on Vehicles
Even though petrol and diesel prices aren’t directly changed, vehicles that consume them, like small cars, bikes, and commercial trucks, have been positively affected by GST 2.0. These GST updates ease upfront purchase costs.
Here is how the impact of GST 2.0 on fuel has affected other vehicles/components:
| Goods | Old GST | New GST |
|---|---|---|
| Two-Wheelers (bikes up to 350 cc) | 28% | 18% |
| Small Cars (petrol <1200cc, <4m length; diesel <1500cc, <4m length) | 28% | 18% |
| Motor cars/other motor vehicles (large cars, >1200cc petrol or >1500cc diesel) | 28% + Cess | 40% (no Cess) |
| Fuel Cell Motor Vehicles, incl. hydrogen-based | 12% | 5% |
| Buses (seating capacity 10+ persons) | 28% | 18% |
| Commercial Goods Vehicles (trucks, delivery vans, etc.) | 28% | 18% |
| Road tractors for semi-trailers (>1800 cc) | 28% | 18% |
| Auto components (general/uniform rate) | 28% | 18% |
| Electric accumulators | 28% | 18% |
Cheaper vehicles reduce ownership costs and lower freight charges, making both personal and commercial transport more affordable.
Also Read: New GST Rates to Make Cars Cheaper
Effect of GST 2.0 on Agricultural Sector Fuels & Machinery
Farmers and agri-industries are major winners of the latest GST amendments. By restructuring taxes on tractors, machinery, and key components, GST 2.0 lowers costs for those who keep India’s food system running.
Here is how the impact of GST 2.0 on fuel will, in turn, affect agriculture:
| Goods | Old GST | New GST |
|---|---|---|
| Tractors (<1800 cc) | 12% | 5% |
| Agricultural diesel engine (>250 cc for tractor use) | 18% | 5% |
| Tractor parts (tyres, hydraulic pumps, bumpers, gearboxes, fuel tanks, etc.) | 18% | 5% |
| Composting machines | 12% | 5% |
This will enhance rural productivity and make farm produce more affordable for consumers.
GST 2.0 on Everyday Goods & Cost of Living
Beyond fuels, the GST Council’s latest meeting addressed essentials like soaps, oils, and kitchenware, reducing taxes to ease household budgets.
Although indirect, these changes reflect the impact of GST 2.0 on fuel, which in turn links to affordability in daily life. The household budgets are affected because cheaper logistics make essentials more affordable and accessible for the general public.
Households will see relief in everyday expenses, balancing the higher costs in other energy-linked sectors.
Conclusion
The Impact of GST 2.0 on fuel goes beyond fuels themselves. It reshapes industries, agriculture, transport, and even the price of daily goods.
The latest GST reforms highlight a citizen-first approach: by rationalising taxes, reducing compliance, and ensuring affordability in key areas, while still maintaining fiscal discipline.
As for the popular question, are petrol and diesel prices reduced in GST 2.0?
No.
Retail petrol, diesel, and LPG remain outside GST. However, changes are widespread for solid fuels, renewable blends, energy transport, and farm machinery, which indirectly shape transport costs, energy pricing, and household budgets.
If you are an MSME owner or a small-scale operator in the fuel industry, this could be a major change for you. Use a GST calculator, run a GST verification, consult an expert, and check your GST number to stay ahead before these reforms go live on September 22, 2025.
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