Gas sale in UP: Reliance tells SC it will pay VAT from Feb 1

Arun S. New Delhi | Updated on November 15, 2017


Reliance Industries Ltd (RIL) on Monday gave an assurance to the Supreme Court that it would pay from the beginning of next month Value Added Tax (VAT) on gas sale in Uttar Pradesh during the period of pendency of the case on double taxation – Central Sales Tax (CST) and VAT – in the Allahabad High Court.

The company said the VAT component would be passed on to the consumers.

The case pertains to RIL’s pact with Uttar Pradesh-based fertiliser companies to supply gas from its Krishna Godavari basin D6 fields.

The apex court meanwhile directed the High Court to expeditiously decide on the plea of RIL against the Uttar Pradesh (UP) Government’s move to impose VAT on the sale of gas by considering it as intra-State sale.

RIL has claimed that the gas sale is of the nature of inter-State sale and, therefore, it is liable to pay only CST (which is collected by the Andhra Pradesh Government – state of origin). RIL says that the gas allocation and its pricing are decided by the Centre, while it is only a contractor.

But the UP government contends that VAT can be imposed on the gas sale as the actual consumption was taking place in the State. According to the tax norms, double taxation is not permitted in the country.

The High Court last July had stayed Tax Department’s direction on imposing VAT. The State Government then moved the apex court against the stay order. The State is seeking to levy Rs 724 crore as VAT for gas sale during 2009-10. Last August, the apex court has issued notice and asked the Centre to file its reply.

RIL supplies around 3.5 million standard cubic metres of gas daily to UP-based fertiliser companies (such as Kribhco's unit at Shahjahanpur, Indo-Gulf Fertilizer's unit at Sultanpur and IFFCO's units in Allahabad and Bareilly).

From RIL’s gas supply, these companies produce around 2 million tonnes of urea. The fertiliser firms say that VAT on the gas would result in increased production costs, while the Fertiliser Ministry has also reportedly said that VAT on the gas would result in prices of several products going up.

Published on January 23, 2012

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