The Oil and Natural Gas Corporation (ONGC) has received a Goods and Services Tax (GST) demand of Rs. 113 crore from the State Tax Department, Jodhpur, concerning royalty payments for a past joint venture. The company announced the development in a regulatory filing on March 17, 2025, stating that it plans to challenge the order.
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The tax demand order dated February 25, 2025, was issued by the Joint Commissioner, State Tax (SGST), Jodhpur, and pertains to the period between April 1, 2020, and May 14, 2020. The order includes Rs. 113.15 crores in GST dues under Section 73 of the CGST Act, 2017, Rs. 95.09 crore in interest charges under Sections 73 and 50 of the CGST Act, and Rs. 11.31 crore penalty under Section 73(9) of the CGST Act.
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The dispute centers around the GST applicability on royalty payments related to an unincorporated joint venture (UJV) involving ONGC and its partners Vedanta Ltd. and CEHL in the Pre-NELP oil block RJ-ON-90/1. The tax department claims ONGC failed to pay GST on the 35% royalty share of each JV partner, while ONGC has already been paying GST under protest for its own 30% share.
ONGC has disputed the claim, arguing that:
The company also stated that the issue of GST levy on royalty is already under litigation, and it intends to file an appeal before the appropriate appellate authority within the stipulated time.
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ONGC clarified that this tax demand will not have a significant impact on its financials or operations, given the company’s large scale of business. The case could set a precedent for similar tax disputes in the oil and gas industry, where royalty payments are a common financial obligation. The matter is part of a broader legal debate regarding whether GST should be applied to royalty payments in resource extraction industries. Several companies have previously challenged similar tax interpretations, with cases still pending in various courts
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