Bill C-38 extends the suspension of federal fuel excise taxes through January 2027, followed by a half-rate phase from February to March before standard rates resume in April 2027.
Canada’s Department of Finance has introduced Bill C-38, the Canadian Fuel Affordability Act, on 22 September 2026, extending a temporary suspension of the federal fuel excise tax that began on 20 April 2026, responding to elevated fuel costs linked to global supply disruptions in the Middle East.
Under the extension, the federal fuel excise tax suspension remains in place until 31 January 2027.
The measure applies to gasoline, diesel, and aviation fuels. Consumers save approximately 10 cents per litre on gasoline and 4 cents per litre on diesel, equivalent to roughly CAD 5 on a typical 50-litre tank of gasoline.
Gasoline prices fell 11 cents per litre on the first day the original suspension took effect in April 2026, showing immediate market impact.
Phased reduction begins February 2027
From 1 February to 31 March 2027, the tax rates will decrease by half. Gasoline and unleaded aviation gasoline rates drop to 5 cents per litre, leaded aviation gasoline to 5.5 cents per litre, and diesel and aviation fuel to 2 cents per litre.
On 1 April 2027, all rates will return to standard levels of 10 cents per litre for gasoline, 11 cents per litre for leaded aviation gasoline, and 4 cents per litre for diesel and aviation fuel.
The extension provides an additional CAD 2.9 billion in tax relief, bringing total estimated relief for 2026 to 2027 to CAD 5.3 billion. The government estimates that fuel prices dropped 11 cents per litre the day the original suspension took effect in April 2026.
Broader economic implications
The tax relief targets truckers, farmers, construction companies, and food delivery services that depend on fuel for operations. The Department of Finance states the measure helps offset pressure on energy markets beyond Canada’s control while keeping more money in household and business accounts.
