India’s oil industry seeks lower GST rates in upcoming Budget
As the Indian government prepares to unveil its Budget for 2026-27, the country’s oil and gas industry is eagerly awaiting a crucial decision that could significantly impact its operations. The industry is seeking the inclusion of crude oil and natural gas under the Goods and Services Tax (GST) framework, but with a lower tax rate of 5%. This move is expected to improve the ease of doing business in the sector and provide a much-needed boost to the industry.
According to Kapil Garg, Founder of Oilmax Energy, the industry remains hopeful that the government will consider its request. “We remain hopeful of the inclusion of petroleum within the GST framework,” he said. This sentiment is shared by other industry stakeholders, who believe that the inclusion of crude oil and natural gas under GST would help to reduce the complexity of taxes and make the sector more competitive.
Currently, petroleum products such as petrol, diesel, and liquefied petroleum gas (LPG) are outside the GST framework, and the taxes levied on these products vary from state to state. This has led to a complex tax structure, which can be challenging for businesses to navigate. By including crude oil and natural gas under GST, the government can help to simplify the tax structure and reduce the burden on businesses.
Moreover, the industry is also seeking compensation for the under-recoveries made on LPG sales. An executive from ICRA, a leading credit rating agency, said that the industry may seek compensation for the losses incurred due to the sale of LPG at subsidized rates. This is a long-standing issue, and the industry has been seeking relief from the government for several years.
The inclusion of crude oil and natural gas under GST is expected to have a positive impact on the industry. It will help to reduce the tax burden on businesses, making them more competitive in the global market. Additionally, it will also help to increase the government’s revenue, as a lower tax rate is expected to lead to increased economic activity.
The oil and gas industry is a critical sector in the Indian economy, and it plays a vital role in the country’s energy security. The sector is expected to grow significantly in the coming years, driven by increasing demand for energy. However, the industry faces several challenges, including high taxes, complex regulations, and infrastructure constraints.
To address these challenges, the government has taken several initiatives in recent years. These include the introduction of the Hydrocarbon Exploration and Licensing Policy (HELP), which aims to simplify the process of exploration and production of hydrocarbons. The government has also launched several other initiatives, such as the Gas Grid project, which aims to increase the use of natural gas in the country.
Despite these initiatives, the industry still faces several challenges. The high tax rate on petroleum products is a major concern, as it makes the sector less competitive in the global market. The industry is also facing challenges related to infrastructure, including the lack of adequate storage and transportation facilities.
In this context, the inclusion of crude oil and natural gas under GST is a critical step towards improving the ease of doing business in the sector. It will help to reduce the tax burden on businesses, making them more competitive in the global market. Additionally, it will also help to increase the government’s revenue, as a lower tax rate is expected to lead to increased economic activity.
The industry is hopeful that the government will consider its request and include crude oil and natural gas under GST at a lower tax rate of 5%. This will be a significant positive step for the sector, and it will help to boost the industry’s growth and competitiveness.
In conclusion, the Indian oil and gas industry is seeking the inclusion of crude oil and natural gas under GST at a lower tax rate of 5% in the upcoming Budget. This move is expected to improve the ease of doing business in the sector and provide a much-needed boost to the industry. The industry is also seeking compensation for the under-recoveries made on LPG sales, which is a long-standing issue. The government’s decision on these issues will be critical, and it will have a significant impact on the industry’s growth and competitiveness.
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