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Oil and Gas Industry to Suffer Post GST

GST is set to be implemented from July 1 onwards which would negatively impact the oil and gas industry as revealed by an Icra-Assocham report. This is so because the industry would be governed by both the current tax regime as well as GST tax regime.

The oil sector would have to borne double compliance costs since five petroleum products namely, crude oil, natural gas, motor spirit, high-speed diesel and aviation turbine fuel have been excluded from the GST. While other products such as LPG, naphtha, kerosene, fuel oil, have been included under GST.

Services make up a huge chunk of the capital expenditure (capex) and operational expenditure (opex) of oil exploration companies. In the present tax regime, these services are taxed at a rate of 15% however under GST 18% rate would be levied on them; which would negatively affect the profit margins of the oil firms.

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