VAT on Petroleum
Value Added Tax compliance and advisory for dealers in and buyers of petrol, diesel, aviation turbine fuel, natural gas and petroleum crude.
Five petroleum products remain outside the Goods and Services Tax until the Goods and Services Tax Council recommends a date for bringing them in: petroleum crude, motor spirit, high speed diesel, natural gas and aviation turbine fuel. They continue to attract state Value Added Tax and central excise duty. For anyone dealing in them the result is a parallel compliance regime, and for anyone buying them as an input the result is a tax cost that no credit mechanism recovers.
What our petroleum VAT service covers
For dealers who sell these products, and for businesses that consume them.
- Value Added Tax and Central Sales Tax registration for fuel retailers, bulk suppliers and gas distributors
- Applying the correct state rate, including differential rates for bulk and specified buyers
- Filing periodic Value Added Tax returns alongside Goods and Services Tax returns for other supplies
- Advising buyers on the credit blockage where fuel is consumed as an input
- Computing reversal of Goods and Services Tax credit attributable to non-Goods and Services Tax turnover
- Handling assessments, notices and reconciliation of turnover across both laws
What petroleum VAT compliance turns on
Four issues that affect sellers and buyers differently.
The Five Products
Petroleum crude, motor spirit, high speed diesel, natural gas and aviation turbine fuel remain outside the Goods and Services Tax until a date is notified on the Council's recommendation.
State Rate Variation
Rates on these products differ sharply between states and often between categories of buyer, which makes location and customer classification a pricing issue as well as a tax one.
Broken Credit Chain
A manufacturer or transporter buying diesel bears Value Added Tax that cannot be set off against Goods and Services Tax output liability, so it stays in the cost.
Credit Reversal
A dealer with both Goods and Services Tax and non-Goods and Services Tax turnover must reverse the common credit attributable to the latter.
Our process
From initial consultation to completion.
Product and Flow Mapping
Identifying which products, which states and which categories of customer are involved.
Rate and Registration Setup
Confirming registrations and configuring rates by product, state and buyer category.
Periodic Filing
Filing Value Added Tax and Central Sales Tax returns and reconciling them with the Goods and Services Tax position.
Cost and Credit Review
Quantifying blocked tax and common credit reversal, so the exposure is priced rather than discovered.
Why petroleum sits awkwardly across two regimes
What sets our approach apart.
The credit chain is broken by design
Value Added Tax paid on fuel is not creditable against Goods and Services Tax, so for transporters and manufacturers it is a permanent cost rather than a pass-through.
Common credit reversal is routinely missed
Dealers with mixed turnover often claim full Goods and Services Tax credit on shared overheads without reversing the portion attributable to non-Goods and Services Tax sales.
Rates move with state budgets
Value Added Tax rates and cesses on fuel are revised by states more often than most tax rates, and stale rate masters flow straight into wrong invoices.
Petroleum VAT questions answered
What people ask before engaging us.
Dealing in fuel across two tax regimes?
We will handle the VAT side and quantify the credit you are silently losing on the GST side.
