The Central Board of Excise and Customs said that it would levy a service tax from this financial year on the royalties paid by the producers to the Centre for the use of natural resources.

The total service tax amount—to be paid by companies like ONGC, Cairn India, and RIL—could be as much as Rs.1,900 crore, based on the total royalty of Rs.12,817 crore paid to the Centre and the states in 2015-16.

“In principle we believe service tax is not applicable on royalty,” Cairn India said in a statement on Thursday. “We along with other industry players and through industry bodies have represented to the government seeking clarification in this regard. There is no tax on output as it is not a pass through as available with some of other industries, and is an additional cost to the business.”

RIL declined to comment when contacted, while the ONGC spokesperson was unavailable for comment.

The CBEC had in a circular said that while one-time payments for natural resources are exempt from service tax, period payments, such as the monthly royalty payments made by oil and gas companies, were not exempt.

The service tax exemption is applicable only to “one time charge, payable in full upfront or in installments, for assignment of right to use any natural resource and not to any periodic payment required to be made”, according to the CBEC circular.

The periodic payments stipulation applies across sectors as it includes spectrum usage charges, licence fees with regard to spectrum, monthly payments on coal extracted from the coal mine and royalty payable on extracted coal and other natural resources.

“The oil and gas industry is facing challenging times with low price environment, this if levied will be additional burden and increase project costs,” the Cairn India statement warned. “This can potentially defer projects and delay the vision laid out by honourable PM of achieving low import targets and increasing domestic production.”