GST on oil and gas exploration hiked to 18 percent

Oil and gas exploration and production will cost more after the GST Council approved raising the tax on services rendered for the same to 18 per cent from the current 12 per cent. The new tax rates will be effective from September 22.

Services relating to exploration, mining or drilling of petroleum crude or natural gas have been increased to 18 per cent with input tax credit (ITC), according to an official note.

The same has also been done for support services to



exploration, mining or drilling of petroleum crude or natural gas or both.

The increase in GST “would lead to an increase in the cost of production of crude oil and natural gas,” said Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, Icra Ltd.

As crude oil and natural gas are outside the purview of GST, an increase in the cost of production without an offset available on the sale of these products will lead to stranded taxes, he said.