Gujarat asks Essar to repay Rs 6,300 cr sales tax

Days after the Supreme Court overturned a ruling that allowed Essar Oil to defer payment of sales tax, the Gujarat government has asked the company to repay about Rs 6,300 crore sales tax plus interest accrued.

"...Subsequent to the decision of the Supreme Court of India on January 17 relating to repayment of deferred sales tax, it (Essar Oil) has received a demand notice from the tax authorities of the Gujarat Government for repayment of the full amount of sales tax deferment benefit utilised by the company of approx Rs 6,300 crore, plus interest accrued," Essar Oil said in a statement.

The Supreme Court had on January 17 set aside a ruling of the Gujarat High Court that allowed Essar Oil the tax benefit. Sales tax due to be paid in installments was about Rs 6,300 crore as of December.

"As announced previously, the company is in discussion with the Gujarat government regarding a repayment schedule and is in the process of filing a petition seeking a review of the decision in the Supreme Court," the statement said.

Essar Oil, in which London-listed Essar Energy Plc holds 87% stake, has "already made provision for repaying part of the sales tax deferment liability. This liability has been assigned to a third party."

"As of December 31, 2011, the amount assigned is Rs 1,800 crore. This amount is repayment to Essar Oil to meet any payments of the deferred tax benefit in accordance with the terms of the agreement," the statement added.