The Centre on Wednesday said that the GST Council had at its meeting on October 6 taken decisions to reduce the cascading effect of excluding petrol, diesel, ATF, natural gas and crude oil from the purview of GST.
The decisions include cutting the rate on ancillary services such as transport of natural gas through a pipeline, and import of rigs.
‘Incentivise E&P’
“To reduce the cascading of taxes arising on account of non-inclusion of petrol, diesel, ATF, natural gas and crude oil in GST and to incentivise investments in the E&P (exploration and production) sector and downstream sector, the GST Council in its 22nd meeting held on October 6, 2017, has made… recommendations for GST rate structure for specified goods and services,” the Finance Ministry said in a release. Offshore works contract services and associated services relating to oil and gas exploration and production in offshore areas beyond 12 nautical miles would be taxed at 12%, according to the release. The transportation of natural gas through pipelines would attract GST of 5% without input tax credits (ITC), or 12% with full ITC.
“Import of rigs and ancillary goods imported under lease will be exempted from IGST, subject to payment of appropriate IGST on the supply/import of such lease service and fulfilment of other specified conditions,” the release added. GST on bunker fuel has also been reduced to 5%, both for foreign going vessels and coastal vessels.
“The much anticipated issues in the oil and gas sector, because of exclusion of petrol, diesel, crude, natural gas and ATF, have started surfacing,” said Abhishek Jain, Tax Partner, EY India. “The exclusion of these products from GST increases the cost of these products as input GST not being creditable against sale of these products adds to the cost of these products. Further, excise duty/VAT payable on sale of these products is not available as credit to industries buying these products. Thus, it is a double hit.”
The solution would be to apply GST to these products.
“Instead of these ad hoc relief measures, it would be great if the GST Council uses this momentum to include these products into GST which would provide complete relief to this sector,” Mr.Jain added.
Finance Minister Arun Jaitley had last month written to all the States asking them to reduce the VAT rates on petroleum products as they were leading to a cascading of taxes on goods that used them as inputs.
