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Pradhan to move FinMin to include petroleum products under GST ambit

Major oil and gas players in the country have sought intervention from the ministry of petroleum to include crude oil, petrol, diesel, aviation turbine fuel and natural gas under the goods and service tax (GST) ambit.

In a workshop moderated by the petroleum ministry today, the companies highlighted that the exclusion will result in huge stranded taxes in the hands of oil industry due to non-availability of Input Tax Credit towards non-GST products. As per industry estimates, the overall GST impact on petroleum sector will be to the tune of Rs 25,000 crore. Petroleum Minister Dharmendra Pradhan has assured the companies that their concerns will be raised before the finance ministry.

The petroleum products outside GST will come under the current taxation structure, including excise duty, central sales tax and state value-added tax. At one hand, while they will have to pay 18% GST on procurement of various goods, it will not be able to claim input tax credit on the products that they sell. This is likely to hit IOC by Rs 5,000 crore, while HPCL and Oil India expects a hit of Rs 400 crore and Rs 175 crore respectively.

ONGC Chairman and Managing Director Dinesh K Sarraf had on Friday said all oil companies were concerned on the implementation of goods and service tax. Crude oil, natural gas and certain downstream products were out of the purview of GST. "So while we will pay GST on inputs, we do not get credit on our output," he said. The ministry of petroleum and natural gas has written on the issue to the ministry of finance. "But the issue is beyond the ministry of finance and is with GST council," he said.

The Industry representatives highlighted that GST in its present form needs few amendments and clarifications as it may have negative impact on the Domestic Oil and Gas production, manufacturing, capital investment, pipeline expansion plans etc. It was also brought to the notice of the ministry that exclusion of pipeline network from the definition of Plant and Machinery may adversely affect long term capital investment in the pipeline infrastructure projects. Industry players also suggested that green fuels like natural gas, CNG, bio-diesel and ethanol blended petrol should be zero rated to promote environment friendly fuels.

“Because of the exclusion of these products from GST we will suffer additional cost of Rs 5,000 crore, as 70% of our products will come outside the GST ambit,” said A K Sharma, Director (Finance), Indian Oil Corporation.

Pradhan also asked the representatives of the industry to raise their concerns with respective state governments particularly oil and gas producing states to agree to make changes in those provisions pertaining to the Sector which may affect the new investments and employment generation.

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