Ottawa moves to write fuel-tax holiday into law until January 31 with Bill C-38
Bill C-38 would keep the federal excise tax on gasoline and diesel at zero until Jan. 31, 2027, halve it in February and March, and restore full rates on April 1.
The federal government has tabled legislation to extend its pause on the fuel excise tax into the new year. Finance Minister François-Philippe Champagne introduced Bill C-38, the Canadian Fuel Affordability Act, in the House of Commons on Monday, and the bill was given second reading and referred to the finance committee on Tuesday, the same day the Department of Finance announced it.
The bill gives legal force to an extension Ottawa first announced on September 2. It would keep the federal excise tax on gasoline, diesel and aviation fuels suspended until and including January 31, 2027, then phase it back in.
The rates, period by period
Finance Canada estimates the extension adds $2.9 billion in relief, bringing the total to $5.3 billion in 2026-27. The government says a typical 50-litre fill-up costs more than $5 less while the full suspension is in place.
- Until January 31, 2027: tax fully suspended
- February 1 to March 31, 2027: 50% of regular rates, or 5 cents a litre on gasoline and unleaded aviation gasoline, 5.5 cents on leaded aviation gasoline and 2 cents on diesel and aviation fuel
- From April 1, 2027: full rates return, at 10 cents a litre on gasoline, 11 cents on leaded aviation gasoline and 4 cents on diesel and aviation fuel
Why now
The tax was first suspended on April 20, 2026, and Ottawa says gasoline prices fell 11 cents a litre on the first day. The government's spring fiscal update had set the pause to run until and including September 7. Since then, the war in the Middle East has kept crude prices high and damaged refining capacity. “Global conflict and supply disruptions are driving up fuel prices around the world,” Champagne said.
Diesel has been the sorest point. CBC News reported on September 13 that the national average had reached $2.62 a litre, more than a dollar higher than a year earlier according to Natural Resources Canada, and above the top weekly average of 2022.
The limits of the measure
The relief is real but modest compared with recent price swings. The diesel saving is 4 cents a litre, small against a pump price above $2.60. Excise tax is also only one layer of the price; GST and provincial fuel taxes still apply.
There is a fiscal cost, too: $5.3 billion in foregone revenue this fiscal year at a time when Ottawa is already running large deficits. And because the tax comes back in two steps in February and April 2027, households could face a price bump just as winter heating and driving costs peak, unless oil prices ease first. Any further extension would require new legislation.
What it means for households
For a driver filling up once a week, the full suspension is worth roughly $5 a tank, or about $20 a month. Budgeting for the return of the tax in February and April, rather than treating today's price as permanent, avoids a surprise in the spring. Small businesses that run diesel vehicles should note that their relief is smaller per litre. This is general information, not personalized advice.
Related
More in Taxes
Sources
- Department of Finance Canada — Minister Champagne introduces legislation to extend the federal fuel excise tax relief for Canadians
- Department of Finance Canada — The Government of Canada extends the federal fuel excise tax relief on gasoline, diesel, and aviation fuels
- Parliament of Canada (LEGISinfo) — C-38 (45-1)
- Cochrane Observer — Bill C-38 would extend fuel excise-tax suspension to Jan. 31, 2027, then halve rates through March 2027
- CBC News — The price of diesel is skyrocketing. Here's why Canadians may soon feel it at the grocery store
General news and information, not individualized financial advice. Figures reflect the publication date.