Indian Oil Corporation (IOC), the nation’s largest fuel retailer, may have to bear an impact of Rs 4,200 crore per annum due to non-availability of input tax credit under Good Service Tax (GST) on procurement of services and capital goods, oil minister Dharmendra Pradhan said.
New Delhi: Indian Oil Corporation (IOC), the nation’s largest fuel retailer, may have to bear an impact of Rs 4,200 crore per annum due to non-availability of input tax credit under Good Service Tax (GST) on procurement of services and capital goods, oil minister Dharmendra Pradhan said.
“Pursuant to various amendments notified after introduction of GST, it is estimated that there may be an impact of the order of around Rs 4,200 crore per annum towards non availability of proportionate input tax credit of GST paid on procurement of inputs, input services and capital goods, due to exclusion of major petroleum products from the purview of GST,” Pradhan said while replying to a question in Parliament on the impact of GST on IOC.
Crude Oil, Natural Gas, Petrol, Diesel and Aviation Turbine Fuel, while included under the GST Constitutional Amendment Act, are presently, outside the scope of levy of GST, forcing the oil companies to comply with both the old and new tax regime. However, the tax credit cannot be transferred between the two systems.
IOC’s Director-Finance A K Sharma had recently said the company has accumulated stranded input tax credit close to Rs 700 crore post the roll out of GST on 1 July.
Input tax credit allows an oil producer at the time of paying the tax on the final output to deduct the tax already paid on inputs including purchase of machinery and crude oil. As most of the core petroleum products have not been included in the GST ambit, the tax credit which could have been availed cannot be availed under the new tax regime.
Apart from IOC, state-run petroleum explorer Oil and Natural Gas Corp (ONGC) will have to bear a hit between Rs 6,000 crore and Rs 7,000 crore on account of GST, its former Director-Finance A K Srinivasan had last year said, adding that all upstream and downstream companies collectively will have to bear an impact of around Rs 25,000 crore.
Pradhan had said in September last year Finance Minister Arun Jaitley has raised the issue of inclusion of petroleum products in GST.
Shell India Chief Executive Officer (CEO) Nitin Prasad, too, had told ETEnergyWorld in an interview non-inclusion of petroleum products under GST will make oil and gas business expensive. Vedanta Cairn Oil and Gas CEO Sudhir Mathur had also voiced similar concerns on the negative impact of GST on the country’s upstream sector.