Canada’s federal fuel tax relief would continue into 2027 under legislation introduced by Finance Minister François-Philippe Champagne.
Bill C-38, known as the Canadian Fuel Affordability Act, proposes extending the temporary suspension of federal excise tax on gasoline, diesel and aviation fuels until January 31, 2027.
The bill would then introduce half-rate federal excise taxes for two months before the regular rates return on April 1, 2027.
The Department of Finance announced the legislation on September 22, 2026, describing it as a response to higher fuel costs linked to global instability and supply disruptions.
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Federal Fuel Tax: What Bill C-38 would change
If Parliament passes the bill, the federal fuel tax would remain at zero for affected fuels delivered or imported through January 31, 2027.
From February 1 through March 31, 2027, the proposed rates would be:
- 5 cents per litre for gasoline and unleaded aviation gasoline;
- 5.5 cents per litre for leaded aviation gasoline; and
- 2 cents per litre for diesel fuel and other aviation fuel.
The regular federal rates would resume on April 1, 2027.
Those rates are 10 cents per litre for gasoline and unleaded aviation gasoline, 11 cents per litre for leaded aviation gasoline, and 4 cents per litre for diesel and other aviation fuel.
How much relief could drivers see?
The current suspension removes 10 cents per litre from the federal excise tax on gasoline and 4 cents per litre from the tax on diesel.
Finance Canada says that represents savings of more than $5 on a typical 50-litre gasoline fill-up while the full suspension remains in place.
During the proposed February-to-March transition period, the federal portion of the gasoline tax would be 5 cents per litre instead of the regular 10 cents.
That would equal a $2.50 difference on 50 litres compared with the full federal gasoline excise rate, before considering provincial taxes, GST or changes in the underlying fuel price.
For a 50-litre diesel purchase, the proposed half-rate would represent a $1 difference compared with the regular federal diesel excise tax.
The federal excise tax is generally paid earlier in the fuel supply chain and is reflected in fuel prices.
The amount consumers ultimately see at a pump can also be affected by wholesale prices, transportation costs, provincial taxes and retailer pricing.
Relief would also affect businesses and supply chains
The government says the measure is intended to help more than individual motorists.
Lower federal fuel taxes can also affect operating costs for truckers, farmers, food distributors, delivery companies, construction firms and other businesses that use gasoline or diesel.
Finance Canada estimates the proposed extension would provide an additional $2.9 billion in fuel tax relief and bring the total estimated relief for 2026-27 to $5.3 billion.
The government has linked the policy to pressure across transportation and supply chains, where fuel expenses can influence the cost of moving food, building materials and other goods.
The measure is proposed, not yet permanent
Bill C-38 is legislation, so the new schedule is not final until it completes the parliamentary process and receives royal assent.
The proposed changes would amend the Excise Tax Act by extending the zero-rate period and creating temporary half-rates for fuel tax that becomes payable between February 1 and March 31, 2027.
The bill follows an earlier federal decision to suspend the fuel excise tax beginning April 20, 2026.
That initial measure was scheduled to end on September 7, 2026, before the government proposed the later extension.
Separate provincial fuel taxes would continue to apply, meaning the federal measure would not remove all taxes included in the price of gasoline or diesel.
What Canadians should watch next
The next major question is whether Bill C-38 advances through the House of Commons and Senate in time for the proposed tax schedule to apply without interruption.
Drivers do not need to submit an application to receive the relief.
If enacted, the measure would operate through the fuel tax system rather than through direct payments to households.
Canadians should also distinguish this proposal from the federal consumer fuel charge, commonly referred to as the consumer carbon price.
The bill concerns the separate federal excise tax on petroleum products.
The government’s stated timeline is straightforward: a zero federal excise rate through January 31, 2027, half rates from February 1 to March 31, 2027, and regular rates beginning April 1, 2027.
Frequently Asked Questions
What is Bill C-38?
Bill C-38, the Canadian Fuel Affordability Act, is proposed legislation that would extend federal fuel excise tax relief into 2027.
How long would the federal fuel tax remain suspended?
The bill would keep the federal excise tax at zero for affected fuels until January 31, 2027, if enacted.
What would the gasoline tax be from February to March 2027?
The proposed federal excise tax would be 5 cents per litre for gasoline and unleaded aviation gasoline from February 1 through March 31, 2027.
What would the diesel tax be under the proposal?
The proposed federal excise tax on diesel would be 2 cents per litre during the February 1-to-March 31, 2027, transition period.
When would the regular federal fuel tax rates return?
The regular federal excise tax rates would return on April 1, 2027, if the legislation passes as proposed.
Fact-Checked: Key dates, proposed tax rates, estimated relief and legislative details were checked against Finance Canada and Canada Revenue Agency information published on September 22, 2026.
Disclaimer: The proposed fuel tax schedule is not final until Bill C-38 completes Parliament’s legislative process and receives royal assent.