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Bunker (ship fuel) sales in India is expected to bounce back after the government cut the Goods and Services Tax (GST) on the fuel from 18 per cent to 5 per cent, providing huge relief to the traders hit by the steep new levy since it was introduced from July 1.
At an October 6 meeting, the GST Council approved a reduction in the GST on bunkers to 5 per cent, the government said on Wednesday.
“Hopefully, sales will pick-up,” said a Mumbai-based trader at Matrix Bharat Pte Ltd (MXB), a joint venture between Singapore’s Matrix Marine Fuels Pte Ltd and Bharat Petroleum Corporation Ltd, India’s second largest state-run oil refining and marketing company, which saw its sales wiped out by the new levy.
Prior to the introduction of GST, the value added tax (VAT) on bonded bunkers sold to ships engaged in foreign voyages was in the range of 0-4 per cent, depending on the states.
“We will have to wait and see whether we will still be competitive with 5 per cent GST,” said another bunker trader based in Kochi where the VAT was 0.5 per cent prior to the roll-out of GST. “But, something is better than nothing”.
Bonded bunker rates are based on the Mean of Platts Singapore (MOPS), the average of a set of Singapore-based oil product price assessments published by Platts, a global energy, petrochemicals, metals and agriculture information provider and a division of McGraw Hill Financial.
The 18 per cent GST threatened to wipe out the nascent Indian bunker trade which was beginning to show signs of growth over the last couple of years as the nation sought to leverage the port visits of thousands of cargo ships into Asia’s third biggest economy and position it as an alternative to Colombo for the ship fuel needs.
On September 15th, BusinessLine reported that bunker sales had dropped by as much as 90 per cent after the 18 per cent GST was introduced.
Bunker sales in India touched 2 million tonnes in the year to March 2017 with average monthly sales hitting as much as 150,000 tons, driven by suppliers such as Matrix Bharat, Hindustan Petroleum Corporation Ltd, Indian Oil Corporation Ltd and Bharat Chemical.
Kandla, Mundra, Kochi , Mumbai, Vizag and Haldia are the key bunker supplying spots in India.
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