GST Hike: A significant decision pertaining to the oil and gas industry has been made by the GST Council. The GST rate on services pertaining to natural gas and crude oil has been raised by the Council from 12% to 18%. On September 22, 2025, the new rate will go into force. Many people are wondering how much domestic production will be impacted and whether the decision will have an impact on the price of fuel and diesel.
What is different now
Up until now, services associated with drilling, mining, and exploration in the petroleum industry have been subject to a 12% tax. However, this rate will be 18% under the new system. Furthermore, the 18% tariff will also apply to this sector’s allied services.
Influence on businesses costs
Experts predict that oil and gas businesses’ costs will rise in exact proportion to the GST hike. The primary issue is that natural gas and crude oil sales are still exempt from the GST. This implies that businesses will not benefit from the input tax credit. They will therefore have to pay higher taxes, which will increase their overall expenses.
Effects on imports and indigenous production
Domestic drilling and exploration efforts may proceed more slowly if production costs increase. Since the higher tax burden will result in lower profits, many businesses might be hesitant to make investments. According to experts, this could have the consequence of further increasing the nation’s reliance on imports. This shift has the potential to increase India’s already significant reliance on petrol and oil imports.
Will the cost of gas and diesel increase
In other words, petrol and diesel are exempt from GST, thus their prices won’t change right away. However, businesses can progressively pass on this extra expense to customers as exploration and production costs rise. This implies that future fuel costs might experience indirect pressure.
What is the goal of the government
The administration wants to make the GST system more uniform and raise tax collections. However, the industry will face some challenges as a result. Although experts think that this decision may somewhat depress the investment climate, the government thinks that it would increase revenue collection.
Disclaimer: This article is written for general information purposes only. The information given in it is based on various sources and may change over time. Readers are advised to check the official government notification and expert opinion before taking any financial or business decision.
