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OIL SECTOR GST IMPACT
- 1. OIL SECTOR GST Impact AnalysisGST Impact AnalysisGST Impact AnalysisGST Impact Analysis By BHARAT D SARAWGEE & CO
- 2. INDUSTRY OVERVIEW BHARAT D SARAWGEE & CO
- 3. UPSTREAM Exploration and production of Crude oil, natural gas MIDSTREAM Transportation, storage, wholesale marketing of crude DOWNSTREAM Refining and Marketing of petroleum products ONGC, OIL India, Cairn India Reliance Ind IOCL HPCL BPCL CPCL GAIL India BHARAT D SARAWGEE & CO
- 4. Oil Well Refinery Terminals Depots Industrial Consumers Retail Dealers Consumers ATF Stations Consumers LPG Bottling Plants Dealers Consumers DISTRIBUTION CHAIN BHARAT D SARAWGEE & CO
- 5. LEGAL FRAMEWORKBHARAT D SARAWGEE & CO
- 6. Dual Model GST CGST for Central Taxes SGST for State Taxes Cross Credit not allowed IGST for Interstate and Import Can be setoff against CGST and SGST Destination Based Tax Consuming state will collect Tax SGST• VAT • Entry Tax • Purchase Tax • Octroi • Luxury Tax CGST • ED • Service Tax IGST • CVD • SAD • CST BHARAT D SARAWGEE & CO
- 7. Proposed GST Rates by Empowering CommitteeProposed GST Rates by Empowering CommitteeProposed GST Rates by Empowering CommitteeProposed GST Rates by Empowering Committee Particulars Rates Exempted Goods and Services Nil Precious Metal 2%-6% Merit Goods 12% General Rate 17%-18% De Merit Goods 40% The above rates are total of SGST and CGST Only One CGST rate, SGST rate may vary within a small band BHARAT D SARAWGEE & CO
- 8. Applicability on Petroleum Products & ServicesApplicability on Petroleum Products & ServicesApplicability on Petroleum Products & ServicesApplicability on Petroleum Products & Services Crude, Natural Gas, Motor Spirit (MS), High Speed Diesel (HSD), Aviation Turbine Fuel (ATF) out of GST to be included at a later date WHY??? Contributes to 35% of total tax collection of the country Revenue Loss if brought under GST No CENVAT/VAT Credit is available for MS/HSD till date MS and HSD still not under VAT Regime Specific Excise Duty on MS/HSD Crude, Natural Gas, MS, HSD, ATF LPG, Kerosene, Industrial Oils, Lubes, Bitumen etc Transportati on, Storage, Safekeeping, Filling etc BHARAT D SARAWGEE & CO
- 9. GST IMPACT ANALYSIS BHARAT D SARAWGEE & CO
- 10. Multiple TaxesMultiple TaxesMultiple TaxesMultiple Taxes PRODUCTS AND SERVICES OIL CESS ED SALES TAX VAT ENTRY TAX/ OCTROI SERVICE TAX GST CRUDE, Natural Gas, MS, HSD, ATF ✔ ✔ ✔ ✔ ✔ LPG, Kerosene, Lubes, Bitumen, Industrial Oil etc ✔ ✔ ✔ ✔ Services ✔ ✔ BHARAT D SARAWGEE & CO
- 11. CURRENT INDIRECT TAXES vs GST REGIMECURRENT INDIRECT TAXES vs GST REGIMECURRENT INDIRECT TAXES vs GST REGIMECURRENT INDIRECT TAXES vs GST REGIME Product Current Burden of Indirect taxes GST Regime Taxes Crude Rs 50/MT plus 5-8% Rs 50/MT plus 5-8% Natural Gas 0-12.5% 0-12.5% MS Rs 21500 per MT plus 15-35% Rs 21500 per MT plus 15-35% HSD Rs 173300 per MT plus 15%-30% Rs 173300 per MT plus 15%-30% ATF 13% - 38% 13% - 38% LPG Dom-0-5% ND- 21%-24% 18%* Kerosene PDS-0-5%, IND- 26%-39% 18%* Bitumen 19%- 27% 18% Ind Fuel 27%-36% 18% Lubes 24%- 35% 18% Current Burden includes Excise Duty and State taxes like VAT/Sales tax/Entry Tax, range indicating the variation in state taxes *Domestic LPG and PDS SKO may be classified as Merit Goods in GST with a lower rate of tax BHARAT D SARAWGEE & CO
- 12. CURRENT INDIRECT TAXES vs GST REGIMECURRENT INDIRECT TAXES vs GST REGIMECURRENT INDIRECT TAXES vs GST REGIMECURRENT INDIRECT TAXES vs GST REGIME Services Current Tax GST Regime Transportation thru pipeline 15% 18% Storage 15% 18% Supply of Tangible goods 15% 18% Renting of Immoveable Property 15% 18% Safekeeping Charges 15% 18% LPG Filling 15% 18% GTA (Reverse mechanism) 3.75% 18% BHARAT D SARAWGEE & CO
- 13. Local Purchase Interstate Purchase Import Purchase Local Service Interstate Service Import Service ED, VAT BCD, CVD, SAD ED, CST CGST, SGST IGST BCD, IGST ST ST ST CGST, SGST IGST IGST INPUT Goods Refinery Crude Oil VAT/CST VAT/CST Gas VAT/CST VAT/CST Industry Current Taxes GST Regime OUTPUT GST ON UPSTREAM BHARAT D SARAWGEE & CO
- 14. Local Purchase Interstate Purchase Import Purchase Local Service Interstate Service Import Service ED, VAT BCD, CVD, SAD ED, CST CGST, SGST IGST BCD, IGST ST ST ST CGST, SGST IGST IGST INPUT Goods RefineryService ST GST Service ST GST Industry Current Taxes GST Regime OUTPUT Additional Credittable in GST GST ON MIDSTREAM BHARAT D SARAWGEE & CO
- 15. Local Purchase Interstate Purchase Import Purchase Local Service Interstate Service Import Service ED, VAT BCD, CVD, SAD ED, CST CGST, SGST IGST BCD, IGST ST ST ST CGST, SGST IGST IGST INPUT Goods MS/HSD/ATF ED, CST, VAT ED, CST, VAT LPG/Bitumen/ Kerosene/Lubes ST GST Industry Current Taxes GST Regime OUTPUT Propirtionate Credittable in GST GST ON DOWNSTREAM BHARAT D SARAWGEE & CO
- 16. Stranding of INPUT TAXESStranding of INPUT TAXESStranding of INPUT TAXESStranding of INPUT TAXES • As per Section 16(6) of the model GST Act, where the goods and / or services are used by the registered taxable person partly for effecting taxable supplies and partly for effecting non-taxable supplies, including exempt supplies, but excluding `Zero-Rated Supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero rated supplies • MS, HSD and ATF are non taxable supplies, hence proportionate Input Credit to be availed • Stranding of Input Taxes to the tune of Rs 20000 Crores for Industry ( Petrofed letter dated 21/07/16) BHARAT D SARAWGEE & CO
- 17. Impact on Other IndustriesImpact on Other IndustriesImpact on Other IndustriesImpact on Other Industries Non availment of Cenvat Credit/VAT by other sectors using MS/HSD as input GST does not exclude MS/ HSD as inputs Negative List of various VAT Acts abolished Denial of VAT Credit on sale of Natural Gas to other Industries BHARAT D SARAWGEE & CO
- 18. Representation of IndustryRepresentation of IndustryRepresentation of IndustryRepresentation of Industry Considering supplies of petroleum products as Zero rated supplies OR Levying Minimum Taxes on exempt petroleum products to cover the Stranded Input Cost OR Petroleum products to be brought under GST for seamless Credit availability and reduction of cascading effect of taxes BHARAT D SARAWGEE & CO
- 19. OTHER PROVISIONS MAKING IMPACT BHARAT D SARAWGEE & CO
- 20. Taxability of Off Shore suppliesTaxability of Off Shore suppliesTaxability of Off Shore suppliesTaxability of Off Shore supplies IMPACT CS, EEZ not a state Subject to which GST Credit available in which state LAW IGST to be levied on supplies in the course of interstate trade or commerce CGST and SGST to be levied on supplies wthin the state BHARAT D SARAWGEE & CO
- 21. Inter State Stock TransferInter State Stock TransferInter State Stock TransferInter State Stock Transfer IMPACT Payment of Tax on Interstate Stock transfers Increase of Credit Pools Blockage of fund Increased Costs of carrying Inventory LAW Supply without Consideration –taxable under GST No Specific Valuation process for Stock Transfers BHARAT D SARAWGEE & CO
- 22. IMPACT Taxability in all states of tap off points Credits in all such states LAW Fixed establishments a place characterized by sufficient degree of permanence Interstate Pipeline TransferInterstate Pipeline TransferInterstate Pipeline TransferInterstate Pipeline Transfer BHARAT D SARAWGEE & CO
- 23. IMPACT Self owned pipeline transfers taxable services Non availment of IGST credit for Transfers of Crude,Natural Gas, MS, HSD, ATF LAW Interstate Self Services taxable Interstate Self owned Pipeline ServicesInterstate Self owned Pipeline ServicesInterstate Self owned Pipeline ServicesInterstate Self owned Pipeline Services BHARAT D SARAWGEE & CO
- 24. IMPACT Irrecoverable taxes may reduce Prices may go down in states where fully recovered Reduction in Crude Procurement Cost to refineries LAW Entry Tax deleted from State List Deletion of entry tax from state listDeletion of entry tax from state listDeletion of entry tax from state listDeletion of entry tax from state list BHARAT D SARAWGEE & CO
- 25. IMPACT Input Tax is not linked with inputs or input services Input Credits disallowed earlier now allowed Service tax on Secondary Transportation Service tax on Rent Various Marketing Expense LAW Input Goods and Service defined as goods or services used in making output supply Input tax credit defined separately as CGST/SGST/IGST paid on goods or services used for furtherance of business CenvatCenvatCenvatCenvat Credit Rules ModificationCredit Rules ModificationCredit Rules ModificationCredit Rules Modification BHARAT D SARAWGEE & CO
- 26. IMPACT Inclusion will increase the value of Subsidy Blockage of Working Capital Subsidy to be included in value even for stock transfers ? LAW Transaction value shall include subsidies provided in any form or manner Value of supply to include subsidyValue of supply to include subsidyValue of supply to include subsidyValue of supply to include subsidy BHARAT D SARAWGEE & CO
- 27. IMPACT Whether Storage tank/Pipelines will qualify for plant and machinery ? Plant and machinery not defined LAW Input Tax Credit shall not be available for Goods or services acquired by principal in connection with execution of works contract resulting in construction of immoveable property except plant and machinery Eligibility of CreditsEligibility of CreditsEligibility of CreditsEligibility of Credits BHARAT D SARAWGEE & CO
- 28. IMPACT Huge increase in transportation cost for MS/HSD/ATF- Denial of Credit LAW No Abatement provided for GTA services GTAGTAGTAGTA---- RCMRCMRCMRCM BHARAT D SARAWGEE & CO
- 29. IMPACT Treatment of Manufacturing Losses, Storage Losses, In Transit Losses? Mechanism of claiming remission? Statewise different rules may create lot of issues LAW The Central or a State Government may provide for remission of tax on such supplies which are found to be deficient in quantity due to any natural causes Treatment of Natural LossesTreatment of Natural LossesTreatment of Natural LossesTreatment of Natural Losses BHARAT D SARAWGEE & CO
- 30. Administrative DifficultiesAdministrative DifficultiesAdministrative DifficultiesAdministrative Difficulties • Current Complexities plus 30 SGST laws plus GST law plus IGST law • Additional Registrations in each state • Additional Returns of Inward supplies, Outward Supplies and Annual Return in each state • Additional Assessments BHARAT D SARAWGEE & CO
- 31. Complex Credit mechanismComplex Credit mechanismComplex Credit mechanismComplex Credit mechanism IGST IGST CGST SGST CGST CGST IGST SGST SGST IGST Three Credit Pool per state CGST-SGST Set off not allowed Out Put Tax Liability can be set off against Input taxes in given order BHARAT D SARAWGEE & CO
- 32. THANK YOU BHARAT D SARAWGEE & CO