This circular provides clarification on the scope and classification of services relating to exploration, mining or drilling of petroleum crude or natural gas under GST, in response to representations from trade.

The circular explains that most activities directly connected with exploration, mining or drilling of petroleum crude or natural gas are covered under Heading 9986 as “support services to oil and gas extraction.” These include services such as derrick erection and dismantling, well casing and cementing, test drilling, pumping, plugging and abandoning of wells, specialized fire extinguishing services, and operation of oil or gas extraction units on a fee or contract basis.

It further clarifies that certain professional, technical and consulting services relating to exploration do not fall under Heading 9986. Such services are classifiable under Heading 9983. To address this, a new entry for “other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both” has been inserted under Heading 9983 with effect from 1 October 2019. These services include geological and geophysical consulting, feasibility studies, project evaluation, surface and subsurface surveys, and mineral exploration and evaluation services.

The circular emphasizes that classification under Headings 9983 and 9986 shall be strictly governed by the explanatory notes to service codes 998341, 998343, 998621 and 998622 of the Scheme of Classification of Services. Any services not covered under these specified entries must be classified under their respective appropriate headings and taxed accordingly.

This clarification aims to ensure uniformity in classification and GST treatment of services related to the oil, gas and mining sector.