Upstream oil and gas companies can avail an input tax credit (ITC) on Goods and Services Tax paid only on the value added products that are manufactured and covered under GST. This clarification was given by the government in response to a query asking whether ONGC would be eligible to avail credit of five per cent GST paid on specified goods procured by it for petroleum operations.

In an official statement, the Ministry of Petroleum and Natural Gas said, “…In few cases in Gujarat and Mumbai where some value added products (VAP) are being manufactured which are covered under GST, credit on common inputs would be available on proportionate basis. In few cases, the credit would be available on invoice level for inputs which are meant for exclusive use for supply of value added products.”

But, the government maintained that the main output of ONGC, that is crude oil and natural gas, are outside levy of GST and output would be subject to levy of existing taxes, central excise (oil cess), VAT/CST etc. Accordingly, since GST is not payable on output, the credit of input would not be available.

In response to another query, the government said ITC will not be available for GST paid on procurement of goods and services in exploration and production operations that are used for production of crude oil and natural gas.

The government also said Mumbai and Offshore are covered under Separate GST Registration. So the establishments covered under Maharashtra Registration and Offshore Registration would be treated as establishments of distinct persons. Accordingly, the goods procured under Mumbai GST Registration would be subject to levy of Integrated Goods and Services Tax (IGST) if transferred to Offshore.

Related Topics
comment COMMENT NOW