Budget 2026 Expectation: Will Petrol, Diesel, Prices Come Down?

As Budget 2026 approaches, concerns hover around - will fuel prices finally see some relief? However, whether prices will come down depends on how these fuels are taxed and the decisions taken by the Centre and state governments.

Why Petrol and Diesel Are Still Outside GST

At present, petrol and diesel are not included under the Goods and Services Tax (GST). One major reason is revenue. These fuels are a key source of income for both the central and state governments.

Currently, fuel prices include two major taxes. The central government charges excise duty, while state governments impose Value-Added Tax (VAT). If petrol and diesel are brought under GST, states may lose the freedom to fix their own VAT rates, which could lead to a significant drop in their earnings.

Fuel prices are also highly sensitive and depend on global oil prices, exchange rates and domestic demand. By keeping petrol and diesel outside GST, the government retains direct control over tax rates and pricing, allowing it to respond quickly to market changes.

How Businesses Could Benefit If Fuel Comes Under GST

Bringing petrol and diesel under GST could be helpful for businesses in several ways.
One major advantage would be input tax credit. If fuel is taxed under GST, businesses would be able to claim credit for the tax paid on fuel used for work purposes. This could lower overall operating costs, especially for transport-heavy industries.

Another benefit would be simpler compliance. A single GST rate would replace multiple taxes like excise duty and VAT, making tax filing easier and reducing paperwork for businesses operating across different states.

Government's Stand on GST for Fuel

During the 53rd GST Council meeting, Finance Minister Nirmala Sitharaman stated that the central government is open to bringing petrol and diesel under GST. However, this move can only happen if state governments agree, as GST decisions require consensus.

According to the CGST Act, GST on petroleum products can be applied only from a date notified by the government. So far, no such date has been announced. The Constitution also gives the GST Council the power to decide when GST should be implemented on petrol and diesel.

Based on past discussions, if petrol is brought under GST, the rate could go up to 28 percent, along with an additional cess. This means fuel prices may not necessarily fall immediately.

Will Fuel Prices Actually Come Down?

For now, there is no clear indication that petrol, diesel or LPG prices will reduce in Budget 2026. While GST inclusion may simplify taxes and help businesses, it may not guarantee cheaper fuel for consumers unless tax rates are carefully revised.

Much will depend on negotiations between the Centre and states, global crude oil prices, and the government's revenue priorities in the upcoming budget.