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 pinning its hopes on a significant reduction in Goods and Services Tax (GST) rates. The industry is seeking the inclusion of crude oil and natural gas under the GST framework at a lower slab of 5%, a move that is expected to improve the ease of doing business and provide a much-needed boost to the sector.
According to industry experts, the inclusion of petroleum products under the GST framework is crucial for the growth and development of the oil and gas industry. Currently, petroleum products such as crude oil, natural gas, and liquefied petroleum gas (LPG) are outside the ambit of GST, which leads to a complex and cumbersome tax structure. The industry is hopeful that the upcoming Budget will address this issue and bring these products under the GST framework at a lower tax rate.
“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 the inclusion of petroleum products under GST will simplify the tax structure and reduce the compliance burden on businesses.
The industry is seeking a lower GST rate of 5% on crude oil and natural gas, which is significantly lower than the current tax rates. The current tax rates on petroleum products vary from state to state, with some states imposing taxes as high as 30-40%. A lower GST rate of 5% would not only reduce the tax burden on businesses but also make Indian oil and gas companies more competitive in the global market.
In addition to seeking lower GST rates, the industry is also seeking 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 due to the difference between the subsidized and market prices. This is a significant issue for the industry, as LPG is a critical product for cooking and other domestic uses, and the under-recoveries on LPG sales can have a significant impact on the financial performance of oil and gas companies.
The inclusion of petroleum products under the GST framework is also expected to have a positive impact on the government’s revenue collections. Currently, the tax revenues from petroleum products are significant, with the government collecting over Rs 5 lakh crore in taxes and duties on petroleum products in 2022-23. By including petroleum products under the GST framework, the government can expect to collect even higher revenues, as the GST rate of 5% would be applicable on the entire value chain of petroleum products.
The oil and gas industry is a critical sector for the Indian economy, accounting for over 15% of the country’s GDP. The sector is also a significant contributor to the government’s revenue collections, with the government collecting over Rs 10 lakh crore in taxes and duties on petroleum products in 2022-23. Therefore, any measures that can improve the ease of doing business and reduce the tax burden on the industry are welcome.
In conclusion, the Indian oil and gas industry is seeking significant reforms in the upcoming Budget, including the inclusion of crude oil and natural gas under the GST framework at a lower slab of 5%. The industry is also seeking compensation for the under-recoveries made on LPG sales, which is a critical issue for the sector. The government is expected to address these issues in the upcoming Budget, which is expected to be unveiled soon. The industry is hopeful that the government will take a positive view of their demands and announce measures that can improve the ease of doing business and reduce the tax burden on the sector.
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