India’s oil industry seeks lower GST rates in upcoming Budget
The Indian oil and gas industry is pinning its hopes on the upcoming Budget 2026-27, 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 in the sector, which has been plagued by complex tax structures and high rates. The industry is also seeking compensation for the under-recoveries made on LPG sales, which have been a significant burden on oil marketing companies.
According to Kapil Garg, Founder of Oilmax Energy, the industry remains hopeful of the inclusion of petroleum products within the GST framework. “We remain hopeful of the inclusion of petroleum within the GST framework,” Garg said. This sentiment is echoed by other industry stakeholders, who believe that the inclusion of crude oil and natural gas under GST will simplify the tax structure and reduce the compliance burden on companies.
The current tax structure for the oil and gas industry is complex, with multiple taxes and levies applied at different stages of production and distribution. The GST, which was introduced in 2017, has a standard rate of 18%, but petroleum products are currently outside its ambit. The industry is seeking a lower rate of 5% for crude oil and natural gas, which would bring it in line with other essential commodities.
The inclusion of petroleum products under GST is expected to have a positive impact on the industry, making it more competitive and efficient. It will also help to reduce the cascading effect of taxes, where taxes are applied at multiple stages of production and distribution, leading to higher costs for consumers. A lower GST rate will also help to increase demand for petroleum products, which will have a positive impact on the economy as a whole.
In addition to seeking a lower GST rate, the 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 under-recoveries made on LPG sales, which have been a significant burden on oil marketing companies. The under-recoveries are due to the difference between the cost of production and the selling price of LPG, which is subsidized by the government.
The under-recoveries on LPG sales have been a significant challenge for oil marketing companies, which have had to bear the burden of subsidizing the fuel. The compensation sought by the industry will help to mitigate this burden and ensure that oil marketing companies are able to operate profitably. The government has provided compensation to oil marketing companies in the past, but the amount has been insufficient to cover the full extent of the under-recoveries.
The upcoming Budget 2026-27 is expected to be a crucial one for the oil and gas industry, with the government expected to announce measures to improve the ease of doing business in the sector. The industry is hopeful that the government will heed its demands and include crude oil and natural gas under the GST framework at a lower rate of 5%. The government is also expected to announce measures to compensate oil marketing companies for the under-recoveries made on LPG sales.
The oil and gas industry is a critical sector of the Indian economy, accounting for a significant portion of the country’s GDP. The sector is also a major employer, with thousands of people employed in the production, distribution, and marketing of petroleum products. The government’s decision on the GST rate for crude oil and natural gas will have a significant impact on the industry, and the economy as a whole.
In conclusion, the Indian 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 2026-27. The industry is also seeking compensation for the under-recoveries made on LPG sales, which have been a significant burden on oil marketing companies. The government’s decision on these demands will have a significant impact on the industry, and the economy as a whole. The industry remains hopeful that the government will heed its demands and take measures to improve the ease of doing business in the sector.
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