Skip to main content

Import of Oil-Drilling Rigs Kept Out of GST Purview

Import of Oil-Drilling Rigs Kept Out of GST Purview
Move to boost local exploration and production; tax rate cut on bunker fuel to 5% from 12%Import of oil-drilling rigs has been exempted from the goods and services tax (GST) levy to give a boost to domestic exploration and production, the government has said. The GST Council has also cut tax rate on bunker fuel to 5% from 12%.Nearly all deep sea drilling rigs are imported, and a bulk of the ones used in shallow waters to drill wells to probe and produce oil and gas are also of foreign origin.
Petrol, diesel, jet fuel, natural gas and crude oil have been kept out of the GST regime, resulting in continuation of cascading effect of tax-on-tax.The issue had figured during the meeting Prime Minister Narendra Modi held on Monday with CEOs of top international and Indian energy firms. They demanded the inclusion of fuels, especially natural gas, in the GST regime.The council has also decided that offshore works contract services with associated services relating to oil and gas exploration and production in the offshore areas beyond 12 nautical miles shall attract GST of 12%, and transportation of natural gas through pipeline will face 5% without input-tax credits (ITC) or 12% with full credit.
Revenue secretary Hasmukh Adhia had briefed the meeting about the decisions the GST Council had taken on October 6 to grant some relief to the sector that has been hit because of GST paid on inputs could not be set off against the taxes paid on the final product.The Central Board of Excise and Customs in a statement on Wednesday gave details of the decisions taken at the council meeting, which would “incentivise“ investments in exploration and production, and downstream.“Import of rigs and ancillary goods imported under lease will be exempted from IntegratedGST, subject to payment of appropriate IGST on the supplyimport of such lease service and fulfilment of other specified conditions,“ it said.
Tax experts are of the opinion that petro products should be brought under the GST.“Instead of these ad hoc relief measures, it would be great if the Council uses this momentum to include these products into GST which would provide complete relief to this sector,“ said Abhishek Jain, tax partner, EY India.
Boost to Investment
The move to exempt import of oil rigs from goods and services tax (GST) makes sense. Also welcome is the step to reduce the GST rate to 12% for oil exploration and production activity in the deeper offshore. It should shore up investments in the capital-intensive and high-risk exploration and production sector. However, instead of these piecemeal relief measures, the entire oil and gas sector, including the main products such as diesel, petrol and jet fuel, needs to be included in the GST regime
The Economic Times, New Delhi, 12th October 2017

Comments

Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Firms with sales below Rs.50 crore out of ambit

The tax department has reiterated that the PoEM rules, which require foreign firms to pay taxes in India if the effective control is here, will not apply to companies withaturnover of Rs.50 crore or less inafinancial year. Last month, the tax department had come out with the longawaited Place of Effective Management (PoEM) rules, which require foreign companies in India and Indian firms with overseas subsidiaries to pay local taxes if their businesses are effectively controlled by Indians. Then the rules did not setathreshold above which they were to apply. However, the accompanying press release states that the rules will not apply to companies withaturnover of up to Rs.50 crore inayear. That created confusion whether the threshold will be adhered to. Inacircular to clarify things, the Central Board of Direct Taxes (CBDT) said the provision "shall not apply toacompany havingaturnover or gross receipts of ~50 crore or less inafinancial year".

PoEM rules essentially target shell …