crude oil stock exchange, petroleum equipment suppliers canada online,We are a “can do” company that works 24/7 to provide safe, reliable, and cost-effective solutions ,

Oil Companies To Face Higher Tax Burden petroleum equipment suppliers canada online Under GST: Parliamentary Panel

New Delhi: Upstream oil and gas producers like Oil and Natural Gas Corp. and Oil India Ltd will face “substantial additional tax” liability under the proposed goods and repair tax (GST) regime because of the clipping of existing tax breaks, a better tax rate on services and the temporary exclusion of five hydrocarbons from the brand new indirect tax system, a parliamentary panel has reported.

6 m diameter pressure vessel automatic welding

The new tax regime, expected to kick in from 1 July, seeks to streamline the tax system by pruning exemptions and establishing a seamless market across the country.

However, crude oil, petrol, diesel, jet fuel and natural gas have been temporarily excluded from it as part of an understanding between the Union and state governments meant to stop any disruption in states’ revenue from the oil sector within the initial years of the tax reform. The GST Council is anticipated to take a call after a few years on the inclusion of petroleum products under GST.

The parliamentary standing committee on petroleum and natural gas chaired by Bharatiya Janata Party MP from Karnataka, Pralhad Joshi, which tabled its report in both the Houses on Friday, said if the import and excise duty exemptions on select goods for oil and gas production aren’t continued under the GST regime, it’ll lead to “substantial additional tax implication on upstream companies”.

Besides, the five hydrocarbons excluded from GST will continue to be subjected to existing value added taxes (VAT) and cesses. This may prevent oil companies from taking credit for the GST paid on the equipment and services purchased for meeting the tax liability on their output. Use of credit between the 2 systems of tax isn’t allowed.

The panel pointed out that offshore works contracts, which oil and gas producers get into and which at present don’t attract state VAT, will come under GST. Also, service tax levied by the Centre, which currently covers only 40% of the worth of such contracts, will probably be replaced by GST that can apply to its entire value. Also, the petroleum equipment suppliers canada online service tax rate, which at present is 15%, will make way for an expected 18% GST, imposing additional tax burden on upstream companies, the panel noted.

Services are expected to be taxed at three slabs—5%, 12% and 18%—with many of the services taxed at 18%. However, the GST council is yet to arrive at a final decision on the tax rates to be applicable on various services.

Tax experts said the exclusion of five hydrocarbons from GST will have an impact on the economy. “It can be very essential that necessary changes are incorporated within the GST legislation because the hydrocarbon segments missed out of GST are critical components in various downstream industries and are likely to face cost escalation leading to an inflationary effect on the economy,” said Prashant Deshpande, partner, Deloitte Haskins & Sells LLP.

In the case of products purchased from one state to be sold in another, the panel noted that a 2% central sales tax levied now, the proceeds of which go to the origin state, might be replaced by a much higher integrated GST (IGST), causing additional stranding of taxes.

Refiners using crude oil on which they pay excise duty, VAT and cesses, could have petroleum equipment suppliers canada online to maintain separate books of accounts for petrol, diesel and jet fuel that can continue to attract these taxes and for LPG, kerosene and other petrochemicals that can attract GST. It will “increase compliance cost”, the report said.

The panel said the GST will lead to increase in operational cost of the petroleum products and might have a cascading effect across the supply chain. Therefore, some way of giving credit to the taxes paid must be found. It recommended the oil ministry to take up the matter of providing full tax credit with the ministry of finance for a mutually acceptable solution.