Canada’s proposed fuel tax relief extension would keep the federal excise tax at zero for several fuel products until January 31, 2027, before introducing half-rate taxes for two additional months.
Finance Minister François-Philippe Champagne introduced Bill C-38, the Canadian Fuel Affordability Act, on September 21, 2026, according to the Department of Finance Canada’s announcement published September 22.
The legislation is proposed and is not yet in force, as outlined in the Explanatory Notes.
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Fuel Tax Relief: What Bill C-38 would change
Under the proposal, the federal excise tax on gasoline, aviation gasoline, diesel fuel and aviation fuel would remain suspended through January 31, 2027.
The measure would then apply 50 per cent of the regular federal excise tax rates from February 1 through March 31, 2027.
The regular rates would return on April 1, 2027, if the legislation is enacted as proposed.
| Fuel product | Proposed rate from Feb. 1 to Mar. 31, 2027 | Full rate from Apr. 1, 2027 |
|---|---|---|
| Gasoline | 5 cents per litre | 10 cents per litre |
| Unleaded aviation gasoline | 5 cents per litre | 10 cents per litre |
| Leaded aviation gasoline | 5.5 cents per litre | 11 cents per litre |
| Diesel fuel | 2 cents per litre | 4 cents per litre |
| Aviation fuel other than aviation gasoline | 2 cents per litre | 4 cents per litre |
How much relief is being proposed
The federal government says the extension would provide an additional $2.9 billion in fuel tax relief.
That would bring the government’s estimated total fuel tax relief for 2026-27 to $5.3 billion.
For a typical 50-litre gasoline fill-up, the government says the continued full suspension represents savings of more than $5 compared with the regular federal gasoline excise tax.
The actual price reduction drivers see can vary because fuel retailers, wholesalers, market prices, provincial taxes and other costs also affect the final pump price.
The federal excise tax is generally collected earlier in the fuel supply chain and is embedded in the price paid by consumers, rather than being charged as a separate line at most gas stations.
Why Ottawa introduced the proposal
The government said global instability and supply disruptions connected to the conflict in the Middle East have increased pressure on energy markets.
It also pointed to the effect of fuel prices on transportation, food distribution, agriculture, construction, housing, delivery services and aviation.
The government’s stated objective is to reduce some of those costs while the temporary measure remains in place.
The proposal follows an earlier federal suspension that began on April 20, 2026, when the rates were reduced to zero for gasoline, diesel and covered aviation fuels.
That earlier relief was scheduled to end after September 7, 2026, before the government announced a further extension.
What Canadians need to know
Bill C-38 would not create a new direct payment for drivers.
Instead, it would change the federal excise tax rates applied to certain fuel products, with the intended benefit flowing through fuel prices and transportation costs.
The bill covers gasoline, both leaded and unleaded aviation gasoline, diesel fuel and aviation fuel.
Heating oil is treated separately under the federal excise tax system, and the proposed schedule does not mean every fuel-related charge in Canada would be eliminated.
Provincial gasoline and diesel taxes would continue to be set by the provinces and territories.
Prices at the pump could also rise or fall for reasons unrelated to the federal excise tax, including crude oil prices, refining costs, currency movements, regional supply and retailer margins.
When would the new rates take effect
The proposed schedule is based on when the excise tax becomes payable on the fuel, rather than simply the date a consumer fills a vehicle.
The Canada Revenue Agency says the zero-rate period would run until January 31, 2027, followed by the proposed reduced rates from February 1 through March 31, 2027.
Fuel delivered or imported on or after April 1, 2027, would generally be subject to the regular rates if the bill becomes law as drafted.
Businesses that manufacture, import or distribute affected fuels would still have reporting obligations under the Excise Tax Act, including reporting periods in which the amount payable is zero.
Bill still needs to pass Parliament
The proposed extension is not guaranteed to take effect because Bill C-38 must proceed through the parliamentary process before becoming law.
Until the legislation is enacted and applicable provisions come into force, consumers and businesses should not treat the February and March 2027 rates as final.
The government’s current plan is to keep the full suspension in place until January 31, 2027, apply the reduced rates for February and March, and restore the full rates on April 1, 2027.
Frequently Asked Questions
What is Bill C-38?
Bill C-38 is the proposed Canadian Fuel Affordability Act, which would extend the temporary federal fuel excise tax suspension and introduce reduced rates for February and March 2027.
How long would the federal fuel tax stay at zero?
The proposed zero-rate period would continue until January 31, 2027, for gasoline, aviation gasoline, diesel fuel and aviation fuel covered by the measure.
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.
Would provincial fuel taxes also be reduced?
No. Bill C-38 concerns the federal excise tax, while provincial and territorial gasoline and diesel taxes would continue to be set separately.
Is the proposed fuel tax relief already law?
No. The February and March 2027 rates are proposed legislation and would depend on Bill C-38 passing Parliament and coming into force.
Fact-Checked: The proposed dates, fuel categories, tax rates, estimated relief and legislative status were checked against Department of Finance Canada and Canada Revenue Agency information published September 22, 2026. ([canada.ca](https://www.canada.ca/en/department-finance/news/2026/09/minister-champagne-introduces-legislation-to-extend-the-federal-fuel-excise-tax-relief-for-canadians.html?utm_source=openai))
Disclaimer: Fuel prices at the pump may not fall by the full amount of any federal tax reduction because provincial taxes, wholesale costs and market conditions also affect retail prices.