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The Goods and Services Tax will lead to an increase in the operational cost of petroleum products, said the Parliamentary Standing Committee.
In its report on Demands for Grants for Ministry for Petroleum & Natural Gas, the Committee has observed that, “The tax liability of the upstream oil PSUs will increase as the GST rate on inputs is expected to be higher than the prevailing rate of taxation.”
The Committee has noted that since crude oil and natural gas will be kept out of GST, “the upstream companies like ONGC and OIL cannot claim credit for their money spent towards VAT on services hired and goods used for production of petroleum products.”
During the course of refining crude oil, some manufactured products will be kept out of the ambit of GST while some will be under its ambit.
The committee has flagged this again and noted, “This will result in distortions in pricing of the product as well as increase in input cost of the oil companies.”
The committee has noted that GST will lead to an increase in operational cost of petroleum products and can have cascading effect across the supply chain. It has recommended that, “Oil PSU companies should be able to get adjustment of full VAT credit for the total amount against VAT that have been paid by them on inputs and services.”
The committee has also urged the Ministry of Petroleum and Natural Gas to discuss with the Ministry of Finance for providing full credit of VAT to oil companies.
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