Published on : Feb 25, 2015
India’s most awaited month is February where everyone’s reminded of the Budget. The Budget is a way to stir up the economy. The country certainly is in need of some energy boosters that are enlisted under five main requirements within the oil and gas sector.
A tax holiday was the first promise declared under the requirement. However, this was not allowed because the mineral oil could not be defined in Income Tax Act under the Section 80IB(9). The center had to withdraw back to excluding mineral oil.
Moreover, no other country has differentiated between the gas and oil both of which have hydrocarbons. The Budget can only restore the clarity and give the relief a promise.
The second need was to increase the exploration activities and reduce the financial burden stated under the service tax net. Several operators in the oil and gas fields are known as service providers. An operator is the agent of the Joint Venture not providing services and taxing the citizens.
The third pointer discussed the Goods and Services tax adoption. However, the petroleum industry may be excluded from this.
In addition, the Production Sharing Contract (Pre-NELP) required the licensee to bear the royalty costs and cess. These rates continue to rise making it unviable for the licensee and for the marginal and matured fields to survive.
The last point discussed was that the Budget should allow around one-third of the cess gathered under the OIDA to be utilized for the development of the oil industry.