India’s oil industry seeks lower GST rates in upcoming Budget
As the Indian government prepares to unveil its Budget for the fiscal year 2026-27, the country’s oil and gas industry is eagerly awaiting a crucial announcement that could significantly impact its operations. The industry is 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 expected to improve the ease of doing business for oil and gas companies, making them more competitive in the global market.
The oil and gas industry has been pushing for the inclusion of petroleum products under the GST framework for several years. Currently, crude oil, natural gas, and other petroleum products are exempt from GST, but they attract other taxes such as excise duty and Value-Added Tax (VAT). The industry argues that the inclusion of these products under GST would help reduce the complexity of taxes and make the system more streamlined.
Kapil Garg, Founder of Oilmax Energy, expressed optimism about the inclusion of petroleum products under GST. “We remain hopeful of the inclusion of petroleum within the GST framework,” he said. The industry is confident that the government will consider its demands and announce a lower GST rate for crude oil and natural gas in the upcoming Budget.
The inclusion of petroleum products under GST is expected to have a positive impact on the industry. It would help reduce the cost of production, making Indian oil and gas companies more competitive in the global market. Additionally, it would simplify the tax structure, reducing the complexity and compliance burden on companies.
However, 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 losses incurred due to the sale of LPG at subsidized rates. The government had earlier subsidized LPG sales to protect consumers from the impact of high international crude oil prices. However, this move resulted in significant under-recoveries for oil marketing companies.
The compensation for under-recoveries on LPG sales is crucial for the industry, as it would help oil marketing companies to recover their losses. The industry is hoping that the government will announce a mechanism for compensation in the upcoming Budget, which would help to alleviate the financial burden on companies.
The oil and gas industry is a critical sector in the Indian economy, contributing significantly to the country’s GDP. The industry provides employment opportunities to millions of people, both directly and indirectly. Therefore, any decision related to the industry has a significant impact on the overall economy.
The government’s decision to include petroleum products under GST would be a welcome move for the industry. It would help to reduce the complexity of taxes, making the system more streamlined and efficient. Additionally, it would help to reduce the cost of production, making Indian oil and gas companies more competitive in the global market.
In conclusion, the Indian oil and gas industry is seeking the inclusion of crude oil and natural gas under GST at a lower slab of 5% in the upcoming Budget 2026-27. The industry is hopeful that the government will consider its demands and announce a lower GST rate for petroleum products. The inclusion of petroleum products under GST would help to simplify the tax structure, reduce the complexity of taxes, and make the system more efficient. The industry is also seeking compensation for the under-recoveries made on LPG sales, which would help to alleviate the financial burden on companies.
As the Budget announcement approaches, the oil and gas industry is eagerly awaiting the government’s decision. The industry is confident that the government will consider its demands and announce a favorable decision. Only time will tell if the government will heed the industry’s demands and announce a lower GST rate for petroleum products.
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