GST and VAT on Fuel Charges for Fleet Operations
The Authority for Advance Ruling clarified that petrol and diesel charges remain outside GST and are not eligible for input tax credit.
- Ruling
- No.STC/AAR/05/2025, dated 31/10/2025
- Dated
- 31 Oct 2025
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Petrol and diesel are excluded from GST under Section 9(2).
- Fuel charges cannot be treated as a composite supply under GST.
- Input tax credit is not available for VAT paid on fuel purchases.
- The ruling is limited by the lack of specific contract documentation.
In short
A security company asked if charging clients separately for fuel on a per-kilometer basis would bring those fuel costs under the GST net. They wanted to know if they could treat fuel as part of a bundled service or claim tax credits on the fuel they buy.
What has changed
How it worked before
Businesses were often unsure if separating fuel costs into distinct invoices would allow them to treat fuel as a taxable supply under GST or claim input tax credits.
What has changed
The Authority confirmed that petrol and diesel remain outside the GST framework entirely. Because fuel is not a GST-taxable supply, you cannot bundle it with other services to claim input tax credits, and you cannot claim credit for the VAT paid on fuel purchases.
Who this affects
Fleet operators, logistics companies, and service providers who charge clients separately for fuel consumption.
An example
A logistics firm in Chhattisgarh plans to bill clients for fuel separately from their transport services. They wonder if they can claim GST input tax credit on the petrol they buy. Based on this ruling, they cannot claim GST credit because petrol is not a GST-taxable item, and they must continue to follow state VAT rules for fuel.
What you should do
Review your billing structure for fuel. Remember that an Advance Ruling only binds the company that asked and its specific tax office; it is not a general law for all businesses.
If you do nothing
If you incorrectly claim input tax credit on fuel purchases, you risk a tax audit and potential penalties for claiming ineligible credits. A tax officer may demand repayment of the credit plus interest and penalties if they determine your tax filings do not align with the law.
The terms explained
- Composite supply
- A package of two or more goods or services that are naturally bundled together and sold as a single price.
- Input tax credit
- The tax a business pays on its purchases that it can use to reduce the tax it owes on its own sales.
- Outside the purview of GST
- Items that are not covered by the Goods and Services Tax law and remain subject to older tax systems like VAT.
The ruling in detail
Authority for Advance Ruling
M/s Vision Plus Security Control Limited
No.STC/AAR/05/2025, dated 31/10/2025 · Chhattisgarh
Questions before the authority
- Whether the invoice for diesel and petrol charges, invoiced separately on a per kilometer basis, would be considered a supply of goods and liable to VAT, or liable to GST?
- Whether the fuel component, when not bundled with the service and invoiced distinctly, is to be treated independently for tax purposes?
- What is the appropriate classification and rate of tax, if GST is applicable?
- If GST is applicable on fuel charges then further whether Vat is also applicable?
- If on above Fuel charges Vat is applicable, then Can we avail Vat input on purchase of petrol/diesel?
Facts
The applicant intends to engage in fleet operations, providing repair, maintenance, insurance, and driver services to clients. They propose to charge for petrol and diesel separately on a per-kilometer basis, issuing distinct invoices for fuel and other services. The applicant sought a ruling on whether this arrangement constitutes a composite supply under GST or if the fuel component should be treated independently.
Ruling
| Question | What the authority ruled |
|---|---|
| Taxability of fuel charges | Not leviable to GST Fuel is outside the purview of GST under Section 9(2) of the CGST Act |
| Classification as composite supply | Not a composite supply The transaction does not meet the criteria for bundled services |
| Applicability of VAT | Taxed under pre-GST regime Subject to VAT levied by individual State Governments |
| Eligibility for Input Tax Credit | Not eligible Input Tax Credit is not available on VAT paid |
The Authority ruled that GST is not leviable on diesel and petrol charges as they are currently outside the purview of GST. It further held that the transaction cannot be treated as a composite supply, and therefore, the concept of bundled services is not relevant. Finally, it clarified that Input Tax Credit is not eligible on VAT paid on such fuel purchases.
Reasoning
The Authority reasoned that petroleum products, including petrol and diesel, are excluded from GST under Section 9(2) of the CGST Act, 2017, and remain subject to the pre-GST tax regime. Because these products are not taxable supplies under the CGST Act, the concept of a composite supply under Section 2(30) is inapplicable. Furthermore, the Authority noted that the applicant failed to provide specific contracts for review, limiting the scope of the ruling. It relied on Section 16 and Section 17 of the CGST Act to determine that Input Tax Credit is not available for VAT paid on these items.
Provisions relied on
- Section 2(30) of the CGST Act, 2017
- Section 9(2) of the CGST Act, 2017
- Section 16 of the CGST Act, 2017
- Section 17 of the CGST Act, 2017
- Article 279A(5) of the Constitution
For the practitioner
This ruling confirms that fuel charges for fleet operations remain **outside the GST net** and are subject to state-level VAT. It serves as a reminder that the **composite supply** provisions cannot be invoked to bring non-taxable goods into the GST framework. Practitioners should note that the ruling is limited by the lack of specific contract documentation provided by the applicant.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/vision_plus_aar_order_dated_31.10.2025.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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