Rs 400 cr tax hit on ONGC

The government's proposal to levy 10 per cent service tax on surveys and the 2 per cent cess on Central taxes is expected to result in an additional tax outgo of Rs 400 crore for the Oil and Natural Gas Corporation (ONGC).

"The service tax and education cess will result in ONGC having to account for a sizable increase in its tax pay-outs. We estimate it will be over Rs 400 crore this fiscal," ONGC Chairman and Managing Director Subir Raha told reporters on the sidelines of a CII lecture on hydrocarbons.

The service tax is expected to dent the company's earnings by Rs 300 crore. The public sector company outsources a majority of its off-shore exploration survey works and expects the additional tax to be passed on to it.

The 2 per cent cess to fund primary education will result additional outgo of Rs 96 crore, while liability for dividend distribution tax will increase by Rs 9 crore.

The PSU had paid 240 per cent dividend for the year-ended March 2004. ONGC's net profit during the last financial year was estimated at Rs 8,664 crore.