Published 7 October 2026
GST was meant to replace most indirect taxes with one. Yet a fuel bill shows no GST, and neither does a liquor bill or, usually, an electricity bill. These are among the largest items in a household’s spending, and the reasons they sit outside GST are not the same for each. One is constitutional, one is a deferral that has not yet ended, and one is an exemption.
Alcohol: outside GST by the Constitution
The Constitution itself defines what GST can cover. Article 366(12A), inserted by the Constitution (One Hundred and First Amendment) Act, 2016, reads:
“goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption
Alcohol for drinking is therefore not merely untaxed under GST; it is outside what GST can be. Section 9(1) of the CGST Act follows the same line. It levies central tax on all intra-State supplies “except on the supply of alcoholic liquor for human consumption”. Since the Finance (No. 2) Act, 2024, it also excludes “un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption”.
The same amendment left the power to tax such liquor with the States. Entry 54 of the State List, as amended, preserves States’ taxes on the sale of alcoholic liquor for human consumption. That is why liquor prices differ so much from State to State.
Petrol, diesel and gas: inside GST, but not yet taxed
The five main petroleum products are in a different position. They are within the reach of GST, but the tax has not been switched on.
Article 279A(5) provides that the GST Council “shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel”. Section 9(2) mirrors it. Central tax on those five products “shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council”.
As of October 2026, no such date has been notified, so no GST is charged on them. In the meantime, the older taxes continue. Entry 84 of the Union List preserves central excise on the five products, and Entry 54 of the State List preserves States’ taxes on their sale. Bringing petrol and diesel into GST therefore needs no constitutional amendment, only a recommendation from the Council and a notification.
The deferral covers only those five products, named in both the Constitution and the Act.
Electricity: exempt
Electricity is a third case. It is within GST, and there is no deferral. It is exempt by notification. Notification No. 10/2025-Central Tax (Rate), which since September 2025 lists goods exempt from central tax, includes at serial number 111, heading 2716 00 00, “Electrical energy”. The supply of electricity therefore carries no GST.
What this means for businesses
The practical consequence falls mainly on businesses. Input tax credit is credit of GST. Where no GST is charged, there is no credit to take. A transport business pays excise and State taxes on diesel, a factory pays for electricity, and a hotel buys liquor. None of them can set those costs against the GST on its own sales. The taxes stay in its costs, and pass into its prices.
That is the cascading GST was designed to end, and it is why bringing petroleum into GST has remained a recurring question. The first guide in the GST series explains what GST replaced, and the guide on input tax credit explains how credit works.
In short
- Alcohol for human consumption: excluded from GST by the Constitution. States tax it under their own laws.
- Petroleum crude, diesel, petrol, natural gas and aviation fuel: within GST, but levied only from a date the Council recommends and the Government notifies. None has been notified, so excise and State taxes continue.
- Electricity: within GST, but exempt by notification.