GST on capital goods erodes fiscal stability in new oilfield law: Ficci to Oil Minister Puri

New Delhi: The Federation of Indian Chambers of Commerce and Industry (Ficci) has raised concerns that the recent hike in GST on capital goods for the oil, gas, and coal bed methane (CBM) sectors undermines the stability promised under the newly approved Oilfields (Regulation and Development) Amendment Act, 2025.

In a letter to Petroleum and Natural Gas Minister Hardeep Singh Puri on September 25—the second this month—Ficci said raising GST on capital goods for petroleum, natural gas) and CBM from 12 per cent to 18 per cent places additional strain on an industry already disadvantaged by the exclusion of natural gas from GST.

“This increase contradicts various upstream exploration and production (E&P) contracts and will escalate project costs in a sector requiring high-risk, long-gestation investments,” Ficci wrote. It warned the move could deter investment, hamper domestic production, and run counter to India’s energy security and Make in India goals.

The industry body reminded the government that the new Oilfields Act was meant to assure fiscal stability for E&P operators. However, the GST hike disrupts signed contracts, which provided for zero customs duty on imports and zero taxes on deemed export purchases. Ficci clarified that the sector was not asking for fresh incentives but urged the government to maintain the contractual terms already agreed upon.

India currently imports 88 per cent of its crude oil and about half its natural gas. With the government focused on boosting domestic output to reduce import dependence, Ficci argued that increasing GST on capital goods only raises operational hurdles.

Drawing a parallel, Ficci noted that the government allows zero-duty imports in defence manufacturing to encourage domestic capacity. It requested that the GST rate on petroleum and CBM capital goods be reduced to the 0 per cent slab to ease the burden on operators.

As an interim step, Ficci suggested permitting E&P companies to offset GST on inputs against their dues to the government. This, it said, would help restore investor confidence, support domestic oil and gas production, and strengthen India’s energy security by curbing imports.