GST, a ma­jor threat to the oil and gas in­dus­try

Resource Digest - - CONTENT -

The oil and gas sec­tor will not gain from the goods and ser­vice tax (GST) and will lose out due to com­pli­ance with dual tax­a­tion regimes and non-cred­itable tax costs, says a re­port. The GST law in its present form ex­cludes a ma­jor por­tion of the oil and gas in­dus­try prod­ucts thereby ex­clud­ing the in­dus­try from most of the ben­e­fits of the one-tax-one-na­tion pro­posal.

Not just that, the new tax­a­tion regime will im­pose an ad­di­tional bur­den on the in­dus­try due to com­pli­ance to a dual tax regime, said a re­port by the do­mes­tic rat­ing agency.

Prof­itabil­ity of the in­dus­try could also be mod­estly hit be­cause of tax-re­lated un­der re­cov­er­ies, Icra warned. The new tax law does not seek to in­clude oil and gas prod­ucts as well as to­bacco and liquor un­der its purview.

“The im­pact of the GST will be neg­a­tive on the oil and gas in­dus­try due to the com­pli­ance with dual tax­a­tion regimes and non-cred­itable tax costs,” Icra an­a­lysts K Ravichan­dran, Prashant Va­sisht and Anoop Bha­tia say in the re­port. Last week, Par­lia­ment passed the 122nd Con­sti­tu­tion Amend­ment Bill 2014. While the Ra­jya Sabha passed the Bill on Au­gust 3, the Lok Sabha did the same on Au­gust 8.

The Gov­ern­ment hopes to roll out the new tax regime, which will sub­sume sev­eral Cen­tral (cen­tral ex­cise, ser­vice tax, spe­cial ad­di­tional duty of cus­toms etc) and state (oc­troi, en­try tax, value added tax, pur­chase tax etc) taxes into a sin­gle tax, from April 1, 2017. The GST will mit­i­gate cas­cad­ing tax­a­tion and fa­cil­i­tate a com­mon na­tional mar­ket.

For the Bill to be­come a law, it has to be passed by at least 19 state As­sem­blies be­sides set­ting up a GST Coun­cil that will make rec­om­men­da­tions on taxes to be sub­sumed, ex­emp­tions, rates, date from which GST would be levied on crude, high speed diesel, nat­u­ral gas, avi­a­tion tur­bine fuel and petrol.

Ex­plain­ing the ra­tio­nale for their con­clu­sion, the an­a­lysts point out that the present GST law does not in­clude five pe­tro­leum items -crude oil, nat­u­ral gas, mo­tor spirit, high speed diesel and avi­a­tion tur­bine fuel - at present but would be in­cluded at a later date, while LPG, naph­tha, kerosene, fuel oil etc are in­cluded.

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