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The move to fix the Goods and Service Tax (GST) rate at 5 per cent on certain goods used for oil exploration is expected to favour hydrocarbon exploration in the country. But the oil and gas exploration industry is awaiting further clarity on the list of goods that will be allowed this benefit.
“It is yet to be seen what are the items included in the list of specified goods. Presently, the reduced GST rate of 5 per cent is applicable only against Essentiality Certificate (EC) issued by the Directorate General of Hydrocarbons. It is certainly a good step to boost the exploration activities in the blocks awarded under the OALP round I, II and III as the exploration in the blocks awarded in the category II and II basins carry higher risk factor,” a top executive at an oil exploration company told BusinessLine .
The GST council had fixed the applicable rate to 5 per cent on “specified goods for petroleum operations” undertaken under Hydrocarbon Exploration Licensing Policy (HELP) on Friday evening. “In summary, this lower GST rate may see increased exploration activities which may result in new discoveries,” the executive added.
“Our policy and tax team are waiting to see the notification that is expected to be published in a couple of days. They need to see the goods, domestic or imported, to which this applies,” an official at another oil exploration company said.
The move to fix the GST rate at 5 per cent is seen as an attempt to boost the oil and gas exploration activity in the country. This is essential to meet the centre’s target of reducing crude oil import dependence by 10 per cent by 2022.
The GST council has also lowered the rate on Marine Fuel 0.5 per cent (FO) from 18 per cent to 5 per cent. This is the grade of fuel that has been mandated after the new International Maritime Organisation (IMO) regulations become effective from 1 January 2020.
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