
In the last few years, the Government of India (GoI) has tried to revamp policies concerning oil and gas exploration and production in India to give boost to domestic oil and gas production. Further policy and tax interventions are the need of the hour for encouraging investments and ease of doing business in the sector. With an intent to provide further push to the sector, India's oil and gas industry has set high hopes on the upcoming Budget.
Some of the expectations from the upcoming Budget are as under:
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Tax incentives: Exploration and production of oil and gas requires investment of capital and bears economic risks for the project. Thus, the players in this industry hope for tax incentives by bringing back tax holidays to make such investments lucrative. Considering the significant capital outlay required for investment in infrastructure, the government may also consider providing investment-linked incentives on capital expenditure.
Concessional tax regime:
GST: The government may further consider the legacy industry request of bringing natural gas under the GST ambit which will allow cross utilisation of tax credits, relieve burden from companies and help curb inflation. Though GST is not part of Budget per se, the government can provide a broad roadmap as to how they view the transition to GST.
Given this backdrop, the government has a demanding task with respect to appeasing global players. While economy is still reviving from the second wave of the pandemic, one may expect that at least some of the above issues would be well addressed in the upcoming Budget.
(Gaurav Moda is Energy Sector Leader and Neetu Vinayek is Partner and Infrastructure Leader at Ernst & Young LLP. Hiten Sutar and Palak Agrawal, tax professionals at EY, also contributed to this article.)
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