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“Rising Taxes, Falling Prices – A Double Blow to India’s Energy Sector.”

Higher GST to Increase Costs for Oil & Gas Exploration Companies.

India’s upstream oil and gas industry faces rising costs as the GST Council has increased the levy on support and professional services for exploration and drilling from 12% to 18%, effective from September 22. While input tax credit remains available, crude oil and natural gas are excluded from GST, leading to stranded taxes for producers. According to ICRA, this increase will directly raise expenses for companies like ONGC and Reliance Industries, which heavily depend on services such as drilling rigs, offshore support vessels, and anchor-handling supply vessels. As there is no offset on the sale of crude and natural gas, the sector’s cost burden will considerably increase. The timing is especially tough, given that global crude and gas prices have fallen since April 2025 due to weak economic demand and OPEC+ output hikes. Industry analysts warn that the combination of lower revenues and higher costs may squeeze margins and restrict investment in domestic oil and gas exploration.