India’s Growing Appetite for US Crude: Tax and Trade Implications
Indian refiners have sharply increased purchases of US crude oil in April 2025—just ahead of the crucial India-US trade negotiations scheduled for May. This shift isn’t just geopolitical—it has tax and compliance consequences too.
Why the Sudden Rise in US Crude Imports?
- Driven by price arbitrage and expectations of more favourable trade terms
- Indian refiners are diversifying away from Russian and Middle Eastern suppliers
Tax & Compliance Impact: What Businesses Must Track
1. Customs Duties & Valuation
- Basic Customs Duty (BCD) is currently nil on crude imports
- Valuation is per Rule 3 of the Customs Valuation Rules, 2007
2. GST Input Eligibility for Refineries
- Crude oil is non-GST item
3. Transfer Pricing & Related Party Imports
- Import from a US subsidiary may trigger transfer pricing scrutiny
- CBDT’s Section 92A read with Rule 10B needs compliance
- Functional benchmarking is crucial for arm’s length pricing
Implications for Indian Traders and Taxpayers
- Expect more such energy-linked tax policies post May trade talks
- Rising US crude share may demand recalibration of oil pricing models
- CA firms and consultants should prepare for energy-linked compliance reviews under GST, Customs, and FEMA