India’s oil industry seeks lower GST rates in upcoming Budget
As the Indian government prepares to unveil its Budget for the fiscal year 2026-27, the oil and gas industry is pinning its hopes on a significant policy change that could transform the landscape of the sector. The industry is seeking the inclusion of crude oil and natural gas under the Goods and Services Tax (GST) framework at a lower rate of 5 percent. This move is expected to improve the ease of doing business in the oil and gas sector, which has been grappling with multiple tax regimes and high costs.
According to Kapil Garg, Founder of Oilmax Energy, the industry remains hopeful that the government will consider its plea and include petroleum products within the GST framework. “We remain hopeful of the inclusion of petroleum within the GST framework,” Garg said. This sentiment is shared by many industry stakeholders, who believe that a lower GST rate would help reduce the cost of production and make the sector more competitive.
The oil and gas industry is one of the largest contributors to India’s GDP, and its growth is crucial for the country’s economic development. However, the sector is currently facing several challenges, including high taxes, regulatory hurdles, and infrastructure constraints. The inclusion of crude oil and natural gas under the GST framework is expected to address some of these challenges and provide a much-needed boost to the sector.
One of the key benefits of including crude oil and natural gas under the GST framework is that it would help reduce the complexity of tax laws and provide a more streamlined tax structure. Currently, the oil and gas industry is governed by multiple tax regimes, including excise duty, VAT, and CST. The GST framework would simplify the tax structure and reduce the compliance burden on companies, making it easier for them to do business.
Another benefit of a lower GST rate is that it would help reduce the cost of production for oil and gas companies. The current tax rates on petroleum products are among the highest in the world, making it difficult for Indian companies to compete with their global peers. A lower GST rate would help reduce the cost of production and make Indian companies more competitive in the global market.
In addition to seeking a lower GST rate, the oil and gas industry is also seeking compensation for the under-recoveries made on LPG sales. According to an ICRA executive, the industry may seek compensation for the losses incurred on LPG sales, which are currently subsidized by the government. The executive said that the industry may seek compensation for the under-recoveries made on LPG sales, which could be a significant amount.
The demand for compensation for LPG under-recoveries is not new, and the industry has been seeking it for several years. The government has been providing subsidies on LPG sales to keep the prices low for consumers, but this has resulted in significant losses for oil and gas companies. The industry believes that the government should provide compensation for these losses, which would help reduce the financial burden on companies.
The upcoming Budget is expected to be a crucial one for the oil and gas industry, and the government’s decision on the GST rate and compensation for LPG under-recoveries will be closely watched. The industry is hopeful that the government will consider its pleas and provide a more favorable tax regime, which would help boost growth and investment in the sector.
In conclusion, the oil and gas industry is seeking a significant policy change in the upcoming Budget, which could transform the landscape of the sector. The inclusion of crude oil and natural gas under the GST framework at a lower rate of 5 percent is expected to improve the ease of doing business and reduce the cost of production. The industry is also seeking compensation for the under-recoveries made on LPG sales, which could be a significant amount. The government’s decision on these demands will be closely watched, and the industry is hopeful that the government will provide a more favorable tax regime to boost growth and investment in the sector.
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