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 slab of 5%. This move is aimed at improving the ease of doing business in the sector, which has been plagued by complex tax structures and high costs. As the industry prepares for the new financial year, stakeholders are optimistic about the government’s willingness to listen to their demands and provide some much-needed relief.
According to Kapil Garg, Founder of Oilmax Energy, “We remain hopeful of the inclusion of petroleum within the GST framework.” This sentiment is echoed by other industry players, 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. Currently, petroleum products such as petrol, diesel, and liquefied petroleum gas (LPG) are outside the GST framework, and are instead taxed under the Central Excise Act and the Value Added Tax (VAT) laws of the states.
The industry’s demand for lower GST rates is not new, but it has gained momentum in recent months. With the government looking to increase revenue collections and improve the overall business environment, the oil and gas industry is hopeful that its demands will be met. The inclusion of crude oil and natural gas under GST at a lower slab of 5% is expected to reduce the tax burden on companies, making them more competitive in the global market.
In addition to seeking lower GST rates, the industry may also seek compensation for the under-recoveries made on LPG sales, according to an executive from ICRA, a leading credit rating agency. The under-recoveries on LPG sales have been a major concern for oil marketing companies, which have been forced to sell the fuel at subsidized rates to consumers. The government has been providing some compensation to these companies, but the amount has been insufficient to cover the entire under-recovery.
The demand for compensation on LPG under-recovery is likely to be a major talking point in the upcoming Budget. The industry is seeking a more robust mechanism for compensating oil marketing companies for the under-recoveries, which could involve a combination of subsidies and tax breaks. This would help to reduce the financial burden on these companies and enable them to operate more efficiently.
The oil and gas industry is a critical sector in the Indian economy, accounting for a significant proportion of the country’s GDP. The sector is also a major employer, with thousands of people working in the industry directly or indirectly. However, the sector has been facing several challenges in recent years, including high taxes, complex regulations, and intense competition.
The government has taken several steps to address these challenges, including the introduction of the Hydrocarbon Exploration and Licensing Policy (HELP) and the Discovered Small Field (DSF) policy. These policies have helped to increase investment in the sector and improve the business environment. However, more needs to be done to address the industry’s concerns and provide a level playing field for companies operating in the sector.
As the Budget 2026-27 approaches, the oil and gas industry is watching with bated breath. The industry is hoping that the government will take a positive view of its demands and provide some relief on the tax front. The inclusion of crude oil and natural gas under GST at a lower slab of 5% would be a major boost to the industry, and would help to improve the ease of doing business in the sector.
In conclusion, the Indian oil and gas industry is seeking inclusion of crude oil and natural gas under GST at a lower slab of 5% in the upcoming Budget 2026-27. The industry is also seeking compensation for the under-recoveries made on LPG sales, which has been a major concern for oil marketing companies. The government’s decision on these demands will have a significant impact on the industry, and will help to determine the course of the sector in the coming years.
The industry’s demands are reasonable, and are aimed at improving the business environment and increasing investment in the sector. The government should consider these demands positively, and provide some relief to the industry. This would help to boost economic growth, increase employment opportunities, and improve the overall quality of life for citizens.
As we look to the future, it is clear that the oil and gas industry will play a critical role in shaping the Indian economy. The industry’s growth and development will depend on several factors, including government policies, investment, and technology. The government’s decision on the industry’s demands will be a major factor in determining the sector’s future, and will help to shape the course of the industry in the coming years.
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