20.07.2024: Oil and gas sector hopes for inclusion in GST regime

The oil and gas industry is still hoping for tax deferrals and inclusion of the sector in the goods and services tax (GST) regime.

“An additional levy imposed since July 2022, the Special Additional Excise Duty (SAED), is endangering the financial stability of oil and gas companies and negatively impacting their ability to invest in capital-intensive extraction methods that also take into account efficiency and carbon neutrality. This windfall gain tax, imposed in the face of high crude oil prices, discourages sustainable business practices,” an industry source noted.

While Oil Minister Hardeep Puri had recently said that the Ministry of Petroleum and Natural Gas will work to bring petrol, diesel and aviation turbine fuel under GST, the GST Council is yet to take a decision on the matter. Finance Minister Nirmala Sitharaman had said after the last GST Council meeting that the decision has to be taken by the states, though the central government’s intention (at the time of GST rollout) was clear: to levy tax on petrol and diesel.

However, companies point out that the omission of indirect taxation has also led to a skewed scenario for the upstream oil and gas sector as procurement of key goods and services as inputs falls under the purview of GST while outputs fall outside the purview of GST. “Multiple tax regimes are applicable at different parts of the value chain,” the source said.

It is also believed that various industry associations have raised the issue with the ministry of petroleum and natural gas. “Next round of GST reforms to bring GST under a three-tier structure including petroleum, real estate, electricity,” CII had said in its pre-budget recommendations.

For consumers, the inclusion of GST on these items may not mean an immediate price reduction, but experts point out that it could have long-term consequences.

Source: Business Today