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GST to have negative impact on oil and gas industry: Report

Press Trust of India  |  New Delhi 

The Goods and Services (GST) will adversely affect the and gas industry as the sector will have to comply with both the current regime and the framework, according to a report.

The is expected to roll out the GST, which will subsume 16 different taxes, from July 1, 2017. Next meeting of the Council is scheduled to be held on June 18, when it will take up lottery taxes and e-way bill.


"The and gas industry would have to comply with both the current regime as well as the regime leading to double compliance cost because five petroleum products viz crude oil, natural gas, motor spirit, high-speed diesel and aviation turbine fuel have been excluded from the GST, while other products such as LPG, naphtha, kerosene, fuel etc are included," the Icra-said in a joint report.

Besides, it will result in non-creditable costs where an and gas company will pay the on procurement of plant, machinery and services, and will be unable to get credit on sale of the finished products (which are out of the purview of GST) as the input would not be credible against the excise duty and value added levied on these fuels, the report said.

Additionally, as services contribute a significant proportion to the upstream companies' capex and opex, the increase in rate from 15 per cent to 18 per cent would impact the upstream companies adversely, it said.

In the gas utilities segment, the report warned that gas marketers will face complexities as they will pay the on transmission tariffs, while sale of natural gas is outside the purview of

Further, the PNG in industrial and commercial sectors is likely to become less attractive as fuel, because effective rate on competing liquid fuels has reduced from 26-28 per cent to 18 per cent and consumers paying VAT on PNG will not be able to get input credit as most of their finished goods would fall under the regime. Thus, PNG sales could get adversely impacted, it added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, June 13 2017. 20:08 IST
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