Home » Business » Oil drilling cos want crude oil, natural gas under GST
POL is heavily taxed both by Central and State Governments, and the tax incidence can be reduced through cut in excise and customs duties, besides bringing them under GST.
Current status
Crude oil prices have risen due to significant increase in demand for crude oil with recovery in world wide economic scenario and expected fall in supply due to political disturbances in Middle East. India still imports a significant 80% of the total crude oil consumption.
Duty structure
Crude oil as well as Natural gas produced under NELP contracts is not liable to duties of Excise under the Central Excise Act, 1944. However Rs 2500 per tonne is being charged as cess and Rs 50 per tonne as National calamity contingent duty (NCCD). Regards Custom duty it was made 5% from nil. It attracts Rs 50 per tonne as NCCD.
Industry Expectation
Analysts/market expectations
We expect reduction in custom duty on crude oil from 5% to nil and corresponding reduction in petroleum products, say from 7.5% to 2.5%. Also, some concessions on service tax may be given to the oil & exploration companies
Stock to watch
ONGC, RIL, Cairn India, Oil India
Outlook
Crude oil production is expected to rise by 10% in FY'11 which had stagnated around 33 MMT mainly due to incremental crude oil production from Barmer field in Rajasthan by Cairn India. To further intensify efforts of exploration of hydrocarbon in the country, as many as 31 exploration blocks were awarded under the 8th round of New Exploration Licensing Policy (NELP-VIII).
Buoyed by the success of NELP rounds with 87 discoveries so far, Government has further offered 34 blocks under NELP-IX. Oil companies are also trying to increase their presence internationally. Any benefits given to the sector can attract more players and facilitate find more oil and gas and ultimately help contain the pace of increase in POL (including Crude Oil) imports.
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