CNG, natural gas retailing firms will now have to pay turnover tax

Written by fe Bureaus | Mumbai | Updated: Sep 8 2009, 05:48am hrs
Oil regulator Petroleum & Natural Gas Regulatory Board (PNGRB) has levied a turnover tax on the revenues that companies will earn from retailing CNG and natural gas in cities. The Petroleum and Natural Gas Regulatory Board (PNGRB), as per its enacting legislation which has powers to levy fee, has levied a minimum tax of Rs 2 crore per annum on turnover.

As per the Gazette notification, PNGRB has asked entities to pay Rs 2 crore for turnover of up to Rs 20,000 crore under the head other charges. For turnover of up to Rs 50,000 crore it has levied Rs 2 crore plus 0.008% of revenues in excess of Rs 20,000 crore. For turnover up to Rs 1,00,000 crore it will charge Rs 4.4 crore plus 0.005% of revenues more than Rs 50,000 crore. Besides this, 0.2% of capital expenditure during construction period will be payable by entities, it said.

PNGRBs decision is applied to GAIL and Reliance Industries, which earn from selling CNG to automobiles and piped natural gas to households and industries. However, it has evoked an angry reactions from GAIL India, which has expanded its CNG business from 1 company (Mahanagar Gas Ltd) in India to 8 in India and 4 abroad, proposes to approach the Appellate Authority challenging the PNGRBs move. GAIl India sources told FE, PNGRBs move will scuttle the CNG and PNG projects. How can PNGRB impose tax on the entire turnover of the company when retailing CNG, PNG is one of the segments.

RIL sources said, We will study PNGRBs ruling and if the tax will be on the entire turnover of RIL then we will protest against any such move. Similarly, Petroleum Federation of India, a body of oil and gas companies, has also strongly opposed the levy of turnover tax.

Petrofed official, who does not want to be quoted, said, There is no question of imposition of turnover tax on integrated oil companies which are involved in exploration and production, marketing, retailing and other activities. At best, the board can consider charging a portion of turnover of retailing CNG, PNG but certainly not on a tax on the entire turnover. Petrofed had already sent out its representation to the board.

Petrofed official said other charges are similar to levy of turnover tax or sharing of revenue which are not provided for under the PNGRB Act. A new tax can only be levied by the Finance Ministry and also PNGRB does not have powers to withdraw even a single penny collected in such charges, the official added.

Mumbai based analyst opined the PNGRBs move will bring CNG and PNG activities to a standstill. So far 19 cities are being covered. Ironically, since October 2007 not a single city has been added. The levy of turnover tax will further hamper the plans in the pipelines.

In a presentation to PNGRB, it said the Board can levy other charges only against specific service rendered or goods supplied. Besides the new tax, PNGRB has notified fee payable by companies for registration, authorisation and filing complaints.

Drawing parallel with the Central Electricity Regulatory Commission, Petrofed said the Electricity Act provides for reasonable fee structure for various activities (and) no charge as other charges have been levied by the CERC.

There being similarity in functions related to energy sector, PNGRB is requested to withdraw provisions related to other charges, it added.

Charges means demand (an amount) as a price for a service rendered or goods supplied. Thus other charges provision do not conform to the meaning of charge when related to money as no services are being rendered, Petrofed said.