Exploration and Mining Support Services May Soon Attract 18% GST, Up from 12%

The Council has proposed raising GST on exploration, drilling, and mining services from 12% to 18% with input taxcredit (ITC). This covers work like drilling support, well services, and equipment used in oil, gas, and mineral projects.

For oil, gas, and mining companies, this change will increase expenses. Crude oil and natural gas are not subject to GST, which means companies cannot claim full credit for these taxes. The cost of producing fuel and minerals is expected to increase. With global oil and gas prices already under pressure, this move may further reduce profits for exploration companies.

This higher tax may slow down India’s efforts to increase domestic energy production. Projects like coal-bed methane (CBM), which are already cost-sensitive, may struggle to remain competitive. This could make India more dependent on imports, at a time when the country is trying to boost its own energy security.

The mining equipment sector has also been asking for simpler tax rules. Right now, different GST rates apply to equipment and spare parts 18% for components like hydraulics and electronics, but 12% for finished machines like cranes and drilling rigs. This mismatch raises costs and makes manufacturing more complex.

Legal issues are adding to the pressure. Courts have recently upheld that royalties paid by miners to state governments can also attract GST. This means companies in the mining business face extra tax liabilities on top of service charges.

The new GST rates are set to take effect from September 22, 2025, once the government issues a formal notification.

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