India’s oil industry seeks lower GST rates in upcoming Budget
As the Union Budget for 2026-27 approaches, India’s oil and gas industry is pinning its hopes on the government to include crude oil and natural gas under the Goods and Services Tax (GST) framework at a lower rate of 5%. The industry has been seeking this inclusion for a long time, citing the need to improve the ease of doing business and to bring parity with other industries that are already under the GST framework.
The current tax regime for the oil and gas industry is complex, with multiple taxes and levies applicable on different products. The industry is subject to central excise duty, value-added tax (VAT), and other state-specific taxes, which adds to the complexity and increases the cost of doing business. The inclusion of crude oil and natural gas under the GST framework at a lower rate of 5% is expected to simplify the tax structure and reduce the compliance burden on the industry.
“We remain hopeful of the inclusion of petroleum within the GST framework,” said Kapil Garg, Founder of Oilmax Energy. The industry has been lobbying for this inclusion for a long time, and it is expected that the government will consider their demands in the upcoming Budget.
The industry is also seeking compensation for the under-recoveries made on LPG sales. The government had earlier subsidised LPG sales to keep the prices low, but with the increase in global crude oil prices, the subsidies have been reduced, and the industry is now facing under-recoveries on LPG sales. An executive from ICRA, a rating agency, said that the industry may seek compensation for these under-recoveries in the upcoming Budget.
The inclusion of crude oil and natural gas under the GST framework is also expected to help the government in increasing its revenue collection. The oil and gas industry is a significant contributor to the government’s revenue, and the inclusion of these products under the GST framework is expected to increase the tax base and revenue collection.
The GST Council, which is responsible for deciding the tax rates and other GST-related matters, is expected to consider the industry’s demands in its upcoming meeting. The Council has already reduced the GST rates on several products, including fertilisers and medicines, and it is expected that the industry’s demands will be considered on a similar basis.
The oil and gas industry is a critical sector for the Indian economy, and the government’s decision on the GST rates and compensation for under-recoveries will have a significant impact on the industry’s growth and development. The industry is hoping that the government will take a favourable decision in the upcoming Budget, which will help in improving the ease of doing business and increasing the investment in the sector.
In recent years, the government has taken several steps to improve the business environment in the oil and gas sector. The government has introduced policies such as the Hydrocarbon Exploration and Licensing Policy (HELP) and the Discovered Small Field (DSF) policy to increase the investment in the sector. The government has also announced plans to increase the share of natural gas in the energy mix, which is expected to increase the demand for natural gas in the country.
The inclusion of crude oil and natural gas under the GST framework at a lower rate of 5% is expected to be a major boost to the industry. The industry is hoping that the government will consider their demands in the upcoming Budget, which will help in improving the business environment and increasing the investment in the sector.
The government’s decision on the GST rates and compensation for under-recoveries will also have a significant impact on the consumers. The reduction in GST rates is expected to reduce the prices of petroleum products, which will benefit the consumers. The compensation for under-recoveries on LPG sales will also help in keeping the prices of LPG low, which will benefit the consumers, especially the poor and marginalized sections of the society.
In conclusion, the oil and gas industry is seeking the inclusion of crude oil and natural gas under the GST framework at a lower rate of 5% in the upcoming Budget. The industry is also seeking compensation for the under-recoveries made on LPG sales. The government’s decision on these demands will have a significant impact on the industry’s growth and development, as well as on the consumers. The industry is hoping that the government will take a favourable decision in the upcoming Budget, which will help in improving the ease of doing business and increasing the investment in the sector.
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