India’s oil industry seeks lower GST rates in upcoming Budget
The Indian oil and gas industry is gearing up for the upcoming Budget 2026-27, with high hopes of securing 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 long overdue. Currently, crude oil, natural gas, and other petroleum products are outside the GST ambit, which leads to a cascading effect of taxes and results in higher costs for consumers. The industry is hopeful that the upcoming Budget will address this anomaly and bring these products under the GST framework at a lower rate.
“We remain hopeful of the inclusion of petroleum within the GST framework,” said Kapil Garg, Founder of Oilmax Energy. The industry has been making a strong case for the inclusion of petroleum products under GST, citing the benefits of a unified tax structure and the potential to reduce costs for consumers.
The inclusion of crude oil and natural gas under the GST framework at a lower slab of 5% is expected to have a positive impact on the industry. It will not only reduce the tax burden on consumers but also make the industry more competitive. The current tax structure, which includes multiple taxes such as excise duty, value-added tax (VAT), and central sales tax (CST), leads to a complex and cumbersome tax regime.
In addition to seeking lower GST rates, the industry may also seek compensation for the under-recoveries made on LPG sales. According to an ICRA executive, the industry may seek compensation for the losses incurred on LPG sales, which are currently subsidized by the government. The subsidy burden on LPG sales is significant, and the industry is seeking a mechanism to compensate for these losses.
The demand for lower GST rates and compensation for under-recoveries on LPG sales is not new. The industry has been making these demands for several years, but the government has been slow to respond. However, with the upcoming Budget 2026-27, the industry is hopeful that the government will finally address these issues and provide the necessary relief.
The inclusion of petroleum products under the GST framework is also expected to have a positive impact on the government’s revenue collections. According to estimates, the inclusion of petroleum products under GST could result in an additional revenue of Rs 1 lakh crore for the government. This is because the GST rate on petroleum products would be higher than the current tax rates, resulting in higher revenue collections for the government.
The industry is also seeking other concessions, such as a reduction in the customs duty on imported crude oil and natural gas. The current customs duty on imported crude oil is 2.5%, while the duty on imported natural gas is 5%. The industry is seeking a reduction in these duties to make imports more competitive and reduce the cost of production.
In conclusion, the Indian oil and gas industry is seeking significant concessions in the upcoming Budget 2026-27, including the inclusion of crude oil and natural gas under the GST framework at a lower slab of 5% and compensation for under-recoveries on LPG sales. The industry is hopeful that the government will address these issues and provide the necessary relief to make the industry more competitive and improve the ease of doing business.
The demand for lower GST rates and compensation for under-recoveries on LPG sales is a legitimate one, and the government should consider these demands seriously. The inclusion of petroleum products under the GST framework is long overdue, and it is time for the government to take a decisive step in this direction. The industry is hopeful that the upcoming Budget will bring some cheer to the sector, and we will have to wait and see how the government responds to these demands.
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