CBIC Hikes IGST to 18% on Coal Bed Methane Goods

Industry Insights from Next Move Strategy Consulting

In a significant fiscal adjustment affecting the energy sector, the Central Board of Indirect Taxes and Customs (CBIC) has implemented an increase in Integrated Goods and Services Tax (IGST) from 12% to 18% on specified imported goods required in connection with petroleum operations or coal bed methane operations, effective September 22, 2025. This change, stemming from recommendations by the 56th GST Council meeting, covers goods required under policies such as the New Exploration Licensing Policy (NELP), Marginal Field Policy (MFP), and the Coal Bed Methane Policy, as well as specified contracts, aligning taxation with public interest considerations.

Context of the Fiscal Revision

The adjustment originates from the 56th GST Council meeting on September 03, 2025, in New Delhi, chaired by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The Council proposed elevating IGST to 18% on goods listed for use in petroleum operations under exploration licenses or mining leases granted by the Government of India or State Governments to entities like Oil and Natural Gas Corporation or Oil India Limited on nomination basis, as well as under specified contracts, the New Exploration Licensing Policy, the Marginal Field Policy (MFP), and the Coal Bed Methane Policy.

Through Notification No. 36/2025-Customs dated September 17, 2025, the CBIC amends Notification No. 50/2017-Customs dated June 30, 2017, by substituting the earlier 12% rate with 18%. This applies to goods in chapters or headings including 25, 27, 28, 29, 31, 34, 35, 36, 38, 39, 40, 56, 69, 73, 74, 82, 84, 85, 87, 89, or 90, when imported by specified persons such as licensees, lessees, contractors, or sub-contractors involved in these operations.

Core Elements of the Update:

• Goods covered include items in specified HS chapters/headings, applicable to both petroleum and coal bed methane operations.

• Specified persons include licensees authorized to prospect for mineral oils under the Petroleum and Natural Gas Rules, 1959; lessees for mineral oils under those rules; contractors entering agreements with the Central Government for prospecting, extraction, or production; and sub-contractors engaged by them.

• The rate shift from 12% to 18% is exercised under sub-section (1) of section 25 of the Customs Act, 1962, and sub-section (12) of section 3 of the Customs Tariff Act, 1975, deemed necessary in the public interest.

• Condition No. 48 continues to apply as per the customs notification framework.

Adaptable Framework for Sector Operations

This notification provides a structured approach to taxation on imports of specified goods, ensuring consistency across petroleum and coal bed methane activities. By defining eligible entities and linking the rate to specific policies, it facilitates targeted application while maintaining oversight through governmental frameworks.

Market Implications for Coal Bed Methane

As a market research firm, Next Move Strategy Consulting observes that this IGST elevation from 12% to 18% on goods integral to coal bed methane operations may raise input costs for licensees, lessees, contractors, and sub-contractors, potentially impacting project economics and strategic planning in the coal bed methane market. Stakeholders could need to evaluate cost structures under the Coal Bed Methane Policy to sustain operational efficiency amid this fiscal shift.

Sector Feedback and Forward Perspective

The CBIC's action reflects a deliberate policy alignment, particularly for operations under the Coal Bed Methane Policy, amid broader energy sector dynamics. Analysts anticipate this will encourage precise compliance and resource allocation among involved parties.

Advancing Fiscal Alignment in Energy

With this rate adjustment, the CBIC strengthens the taxation framework for coal bed methane operations, supporting structured growth while addressing public interest through updated IGST measures.

Source: A2Z Taxcorp LLP

Prepared by: Next Move Strategy Consulting