Federal fuel tax relief will remain in place longer after Bill C-38 received Royal Assent on October 29, 2026.
The Canadian Fuel Affordability Act extends the temporary suspension of federal excise taxes on gasoline, diesel and aviation fuels through January 31, 2027.
The legislation also sets out a two-month transition period in which the federal rates will be reduced by 50 per cent before returning to their regular levels on April 1, 2027.
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What the federal fuel tax change means
For drivers, the federal excise tax on gasoline and unleaded aviation gasoline remains suspended at zero cents per litre until and including January 31, 2027.
That continues the 10-cent-per-litre relief that was introduced in April 2026, meaning the federal portion of the tax represents more than $5 in savings on a typical 50-litre gasoline fill-up while the full suspension remains in effect.
The measure also applies to diesel fuel, aviation fuel and leaded aviation gasoline, although the regular federal excise tax rates differ by fuel type.
| Fuel | Until Jan. 31, 2027 | Feb. 1 to Mar. 31, 2027 | From Apr. 1, 2027 |
|---|---|---|---|
| Gasoline and unleaded aviation gasoline | $0.00 per litre | $0.05 per litre | $0.10 per litre |
| Leaded aviation gasoline | $0.00 per litre | $0.055 per litre | $0.11 per litre |
| Diesel and aviation fuel | $0.00 per litre | $0.02 per litre | $0.04 per litre |
When the reduced fuel tax rates begin
The federal fuel tax will move from a complete suspension to the reduced-rate period on February 1, 2027.
During that period, gasoline and unleaded aviation gasoline will be taxed at five cents per litre, while diesel and other aviation fuel will be taxed at two cents per litre.
The temporary rates will apply through March 31, 2027.
Full federal excise tax rates will return on April 1, 2027, unless Parliament changes the rules again.
How much relief the measure provides
The Department of Finance Canada estimates that the extension will 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.
The department says the measure is intended to reduce costs for households and businesses affected by fuel prices, including trucking, agriculture, construction, delivery and aviation operations.
However, the federal excise tax is only one part of the price paid at the pump.
Retail fuel prices can also reflect crude oil costs, refining and transportation expenses, retailer pricing, provincial taxes and applicable sales taxes, so the federal tax change does not guarantee that pump prices will move by the full amount in every location.
Why Bill C-38 matters now
The legislation turns the government’s September announcement into an enacted tax measure.
Before Royal Assent, the proposed extension had been described as a temporary continuation of the fuel tax suspension followed by half-rate taxation.
With Bill C-38 now enacted, the key dates and rates are established in law.
The original suspension began on April 20, 2026, when the federal excise tax was reduced to zero on the affected fuels.
The government said gasoline prices fell by 11 cents per litre on the first day of the initial implementation, although prices subsequently continued to be influenced by broader market conditions.
What Canadians should watch
Drivers should expect the federal tax component to remain at zero through January 31, 2027, but should not treat the federal measure as a fixed guarantee of a particular pump price.
Businesses that purchase large volumes of diesel or aviation fuel will also need to account for the scheduled rate increase beginning February 1, 2027.
The next major change is scheduled for April 1, 2027, when the regular federal excise tax rates are set to return.
For consumers comparing prices, the most useful figures are the federal tax rates themselves, because provincial fuel taxes and market prices vary across Canada.
Frequently Asked Questions
How long is the federal fuel tax suspended?
The federal excise tax on affected gasoline, diesel and aviation fuels is suspended through January 31, 2027.
What happens to the fuel tax on February 1, 2027?
Half of the regular federal excise tax rates will apply from February 1 through March 31, 2027.
When do full federal fuel tax rates return?
The regular federal excise tax rates are scheduled to return on April 1, 2027.
How much is the federal gasoline tax relief?
The regular federal excise tax on gasoline is 10 cents per litre, so the full suspension represents 10 cents per litre in federal relief before the half-rate period begins.
Does the federal tax suspension guarantee lower pump prices?
No. Pump prices also depend on crude oil, refining, transportation, retailer pricing, provincial taxes and applicable sales taxes.
Fact-Checked: Key dates, fuel categories, tax rates, Royal Assent and estimated relief amounts were checked against Department of Finance Canada, CRA and Natural Resources Canada information.
Disclaimer: The scheduled tax savings apply to the federal excise tax component and do not determine the final retail fuel price in any particular location.