Petroleum minister Dharmendra Pradhan on Monday assured industry participants that his ministry will take up the concerns over ‘stranded tax’ due to the roll-out of the goods and services tax (GST) with the ministry of finance, a government release said on Monday. Starting July 1, the GST regime will be in place, but it does not include petroleum products such as crude oil, petrol, diesel, aviation fuel and natural gas. The new structure will not allow companies to receive input tax credit on these products.
During a workshop, while referring to GST as a progressive form of taxation, industry representatives referred to several of its provisions which could have adverse impact on upstream, midstream and downstream sectors, the release said. They highlighted that GST needs a few amendments and clarifications, as in the current form it may have a negative impact on domestic oil and gas production, manufacturing, capital investment, pipeline expansion plans, among others.
Pradhan acknowledged the concerns raised and assured that the issues will be conveyed to finance minister Arun Jaitley for an agreeable resolution. Meanwhile, Pradhan also urged the industry to raise their concerns with respective state governments, especially the oil and gas-producing states, to agree to make changes in provisions pertaining to the oil and gas sector which may affect the new investments and employment generation.
During the workshop, the industry faces also highlighted that exclusion of pipeline network from the definition of plant and machinery may adversely affect long-term capital investment in the pipeline infrastructure projects, the release noted. While Indian Oil Corp estimates the stranded tax due to GST to be around Rs 5,000 crore, others such as Hindustan Petroleum Corporation expect it to be around Rs 400 crore. However, the companies agree that the final amount will only be known after the new tax regime sets in.