India’s oil industry seeks lower GST rates in upcoming Budget
The oil and gas industry in India is eagerly awaiting the upcoming Budget 2026-27, with high hopes that the government will include crude oil and natural gas under the Goods and Services Tax (GST) framework at a lower rate of 5%. This move is expected to significantly improve the ease of doing business in the sector, which has been facing various challenges in recent years. According to industry experts, the inclusion of petroleum products under GST will help to reduce the complexity of taxation and make the sector more competitive.
Currently, petroleum products such as crude oil, natural gas, and petrol are outside the GST framework, and are instead taxed under various state and central government laws. This has led to a complex system of taxation, with different rates and rules applying to different products. The industry has been lobbying for the inclusion of these products under GST for several years, and it appears that their efforts may finally bear fruit.
“We remain hopeful of the inclusion of petroleum within the GST framework,” said Kapil Garg, Founder of Oilmax Energy, a leading player in the oil and gas sector. “This will help to simplify the tax structure and reduce the compliance burden on companies like ours.” Garg added that the industry is seeking a lower GST rate of 5% for crude oil and natural gas, which will help to reduce the cost of production and make Indian companies more competitive in the global market.
The inclusion of petroleum products under GST is expected to have a significant impact on the industry, particularly in terms of the ease of doing business. Currently, companies in the sector have to deal with multiple tax authorities and comply with different rules and regulations, which can be time-consuming and costly. By bringing these products under GST, the government can help to reduce the complexity of taxation and make it easier for companies to operate in the sector.
Another issue that the industry is seeking clarification on is the compensation for under-recoveries made on LPG sales. According to an executive from ICRA, a leading credit rating agency, the industry may seek compensation from the government for the losses incurred on LPG sales. This is because the government has been subsidizing LPG sales to households, which has resulted in significant under-recoveries for oil marketing companies.
The ICRA executive said that the industry is likely to seek compensation for these under-recoveries, which could be in the form of a subsidy or a reduction in taxes. This will help to reduce the financial burden on oil marketing companies and make them more competitive in the market. The executive added that the government may consider providing compensation to the industry, given the importance of LPG as a clean and efficient fuel for households.
The oil and gas industry is a critical sector in India, accounting for a significant proportion of the country’s GDP. The sector is also a major employer, with thousands of people working in various roles across the country. By including petroleum products under GST and providing compensation for under-recoveries, the government can help to support the growth and development of the sector, which is critical for the country’s economic prosperity.
In conclusion, the oil and gas industry in India is seeking the inclusion of crude oil and natural gas under GST at a lower rate of 5% in the upcoming Budget 2026-27. This move is expected to simplify the tax structure, reduce the compliance burden, and make the sector more competitive. The industry is also seeking compensation for under-recoveries made on LPG sales, which will help to reduce the financial burden on oil marketing companies. As the government prepares to present the Budget, the industry is hopeful that their demands will be met, and that the sector will be able to grow and develop in a supportive and stable business environment.
About the Author
