India’s oil industry seeks lower GST rates in upcoming Budget
As the Indian government prepares to present the upcoming Budget for 2026-27, the oil and gas industry is pinning its hopes on a key demand: the inclusion of 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 grappling with high taxes and complex regulatory frameworks for years.
According to industry insiders, the inclusion of petroleum products under the GST framework is crucial for the growth and development of the oil and gas sector in India. “We remain hopeful of the inclusion of petroleum within the GST framework,” said Kapil Garg, Founder of Oilmax Energy. This sentiment is echoed by other industry stakeholders, who believe that a lower GST rate would help reduce the burden of taxes on oil and gas companies, making them more competitive in the global market.
Currently, petroleum products such as crude oil, natural gas, and petroleum products are outside the ambit of GST, which means that companies have to navigate a complex web of state and central taxes, including Value Added Tax (VAT), Central Excise Duty, and other levies. This not only increases the cost of doing business but also creates administrative complexities, making it difficult for companies to operate efficiently.
The inclusion of petroleum products under GST would also help to address the issue of cascading taxes, where companies have to pay taxes on taxes, leading to a higher tax burden. By bringing petroleum products under the GST framework, the government can help reduce the tax burden on companies, making them more competitive and boosting economic growth.
Another key demand of the oil and gas industry is compensation for the under-recoveries made on LPG sales. According to an executive from ICRA, a leading credit rating agency, the industry may seek compensation for the losses incurred on LPG sales, which are currently subsidized by the government. The executive noted that the industry has been incurring significant losses on LPG sales, and compensation from the government would help to offset these losses and ensure the viability of LPG distribution businesses.
The demand for lower GST rates and compensation for LPG under-recoveries comes at a time when the oil and gas industry is facing significant challenges, including declining domestic production, increasing dependence on imports, and rising global competition. The industry is also grappling with the impact of the COVID-19 pandemic, which has disrupted global supply chains and affected demand for oil and gas products.
In this context, the inclusion of petroleum products under the GST framework at a lower rate of 5% would be a significant step forward for the oil and gas industry. It would help to reduce the tax burden on companies, improve the ease of doing business, and boost economic growth. The government’s decision on this issue would be closely watched by industry stakeholders, who are hopeful that the upcoming Budget would address their key demands and provide a boost to the sector.
As the government prepares to present the Budget for 2026-27, it is clear that the oil and gas industry is seeking significant reforms to boost growth and development. The inclusion of petroleum products under the GST framework at a lower rate of 5% is a key demand, which would help to reduce the tax burden on companies and improve the ease of doing business. The industry is also seeking compensation for the under-recoveries made on LPG sales, which would help to offset losses and ensure the viability of LPG distribution businesses.
Overall, the upcoming Budget presents an opportunity for the government to address the key demands of the oil and gas industry and provide a boost to the sector. The industry is hopeful that the government would take a positive view of their demands and announce measures to reduce the tax burden, improve the ease of doing business, and boost economic growth.
In conclusion, the oil and gas industry in India is seeking significant reforms in the upcoming Budget, including the inclusion of petroleum products under the GST framework at a lower rate of 5% and compensation for LPG under-recoveries. These demands are crucial for the growth and development of the sector, which is facing significant challenges, including declining domestic production, increasing dependence on imports, and rising global competition. The government’s decision on these issues would be closely watched by industry stakeholders, who are hopeful that the upcoming Budget would address their key demands and provide a boost to the sector.
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