New Delhi: Federal indirect tax body, the goods and service tax (GST) council, has clarified that the cost that oil and gas producers recover from sale of petroleum before sharing profits with government under a production sharing contract is not subject to GST.
The finance ministry said on Monday that the council is of the view that extraction of oil and gas under a contract with the government is not a service rendered by the producer and hence was not liable to be taxed. The council had earlier clarified that the government’s share of profits from the sale of petroleum, called profit petroleum, was also not subject to GST.
“Oil exploration and production contractors conduct all petroleum operations at their sole risk, cost and expense. Hence, ‘cost petroleum’ is not a consideration for service to government of India and thus not taxable per se.,” said a circular from finance ministry. Cost petroleum is the value that producers recover from sale of petroleum to meet their infrastructure and production costs.
“Profit petroleum was exempted recently from GST. With the circular on Monday, there is clarity that even cost petroleum is not subject to GST. However, the tax treatment with respect to transactions between the contractors inter se has not been dealt with in this circular,” said Pratik Jain, leader, indirect tax, PwC India.
The finance ministry circular also clarified that food items supplied to patients in a hospital is part of the overall healthcare services provided to customers and therefore not taxable. However, any food sold to attendants of patients and visitors is taxable, explained the ministry.
It also clarified that any fee paid to or penalty levied by Consumer Disputes Redressal Commission and its subordinate offices are also not subject to GST.