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 tax reform. 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%. This move is expected to improve the ease of doing business and provide a much-needed boost to the sector.
The oil and gas industry has been facing several challenges in recent years, including high tax rates, bureaucratic hurdles, and increasing competition from global players. The inclusion of crude oil and natural gas under GST is seen as a key step towards simplifying the tax structure and reducing the compliance burden on companies operating in the sector.
“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 players, who believe that a lower GST rate would help reduce the cost of production and make Indian oil and gas companies more competitive in the global market.
Currently, crude oil and natural gas are exempt from GST, but they are subject to other taxes such as excise duty, value-added tax (VAT), and central sales tax. The complex tax structure has led to a significant increase in the cost of production, making it difficult for Indian companies to compete with their global counterparts.
The industry is also seeking compensation for the under-recoveries made on Liquefied Petroleum Gas (LPG) sales. According to an executive from ICRA, a leading credit rating agency, the government may consider providing compensation to oil marketing companies (OMCs) for the losses incurred on LPG sales. This move would help OMCs to maintain their profitability and invest in the expansion of their operations.
The demand for lower GST rates and compensation for LPG under-recoveries is not new. The oil and gas industry has been raising these issues for several years, but the government has not taken any concrete steps to address them. However, with the upcoming Budget, the industry is hoping that the government will finally take notice of their concerns and take corrective action.
The inclusion of crude oil and natural gas under GST is expected to have a positive impact on the economy. It would simplify the tax structure, reduce the compliance burden, and increase the competitiveness of Indian oil and gas companies. Additionally, it would also help to increase the government’s revenue, as a lower GST rate would encourage companies to produce and sell more, leading to higher tax collections.
The oil and gas industry is a critical sector for the Indian economy, accounting for a significant share of the country’s GDP. The sector provides employment to millions of people, both directly and indirectly, and is a major contributor to the government’s revenue. Therefore, it is imperative that the government takes steps to support the growth and development of the sector.
In recent years, the government has taken several steps to promote the growth of the oil and gas sector. These include the introduction of the Hydrocarbon Exploration and Licensing Policy (HELP), which aims to simplify the process of exploring and producing oil and gas. The government has also announced plans to invest in the development of new oil and gas fields, and to increase the use of natural gas as a clean and efficient fuel.
However, despite these efforts, the oil and gas industry continues to face significant challenges. The high tax rates, complex regulatory framework, and increasing competition from global players are some of the major hurdles that the industry needs to overcome. The inclusion of crude oil and natural gas under GST at a lower rate of 5% would be a significant step towards addressing these challenges and promoting the growth and development of the sector.
In conclusion, the oil and gas industry is seeking lower GST rates and compensation for LPG under-recoveries in the upcoming Budget. The inclusion of crude oil and natural gas under GST at a lower rate of 5% would simplify the tax structure, reduce the compliance burden, and increase the competitiveness of Indian oil and gas companies. The government should consider the industry’s demands and take concrete steps to support the growth and development of the sector. This would not only benefit the industry but also have a positive impact on the economy as a whole.
About the Author
