The imposition of higher GST on exploration, development and production of oil and gas will continue to be influenced by the realization of power -growing companies that are already dealing with headwind due to lower prices for crude oil, said Ratings Agency ICRA.
In addition, volatility in the global markets in combination with OPEC+ reversal production -reduction has been reduced income from companies such as ONC and Oil India, which will be further exacerbated due to a higher GST.
“GST is increased in the event of exploration, development and production of oil and gas from 12 percent to 18 percent, which would lead to an increase in production costs of crude oil and natural gas,” said Prashant Vasisht, Senior VP and Co-Group Head of company reviews at ICRA.
Since crude oil and natural gas fall outside the goal of GST, an increase in production costs without an offset that is available in the sale of these products will lead to stranded taxes, he expected.
“Because the oil and gas prices have been considerably moderated since April 2025 because of the global economic headwind and the relaxation of production -cutbacks by OPEC+, the realizations of power -running -up companies have been reduced. According to the moderation of the realizations and the increase in production costs, they could be a double whom of industry,” industry, ” Vasisht added.
Dhaval Popat, energy analyst at Choice Institutional Equits said, ‘Higher GST speed will make exploration and production projects (E&P) projects-in particular Coal bed with the (CBM) initiatives-more competitive, creating a headwind for efforts aimed at stimulating the domestic output and reducing import dependence. “
The government has raised the GST from 12 percent to 18 percent on petroleum operations that have been undertaken under licenses for petroleum or mining permits granted by the Indian government or a state government to the ONC or Oil on nomination.
This waived, higher load also applies to petroleum activities that are undertaken under specified contracts, or oil activities that are carried out under specified contracts under the new policy for exploring licenses. This also applies to petroleum activities that are undertaken under specified contracts under the marginal field policy (MFP), or coal bed with aid activities that are undertaken under specified contracts under the methane policy of the coal bed.
In addition, a compound range of works and associated services, with regard to offshore working contract with regard to oil and gas exploration and production in offshore areas, will attract 18 percent GST with input tax credit (ITC).
The supply of transport of natural gas, petroleum crude oil, motor spirit, high speed diesel or ATF by pipeline will also attract a higher GST at 18 percent with ITC or GST at 5 percent without ITC.
Other professional, technical and business services with regard to exploration, mining or drilling of petroleum crude oil or natural gas or both will also attract a higher GST of 18 percent with ITC
Published on September 4, 2025
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