The oil and gas sector will not gain from the goods and services tax (GST) and will lose out due to compliance with dual taxation regimes and non-creditable tax costs, says a report.
The GST law in its present form excludes a major portion of the oil and gas industry products thereby excluding the industry from most of the benefits of the one-tax-one-nation proposal. Not just that, the new taxation regime will impose an additional burden on the industry due to compliance to a dual tax regime, said a report by the domestic rating agency. Profitability of the industry could also be modestly hit because of tax-related under recoveries, Icra warned. The new tax law does not seek to include oil and gas products as well as tobacco and liquor under its purview. “The impact of the GST will be negative on the oil and gas industry due to the compliance with dual taxation regimes and non-creditable tax costs,” Icra analysts K Ravichandran, Prashant Vasisht and Anoop Bhatia say in the report. Last week, Parliament passed the 122nd Constitution Amendment Bill 2014. While the Rajya Sabha passed the Bill on August 3, the Lok Sabha did the same on August 8.