-
Cabinet cuts tax burden on ONGC, OIL
The Cabinet has curtailed the tax burden on state-run Oil and Natural Gas Corp and Oil India in some of the old production contracts, allowed gas producers in the North-East to charge market rates, and extended tax incentives to contractors of a few old small fields.
These measures will contribute towards ease of doing business in the exploration and production sector and help raise the oil and gas output in the country, oil minister Dharmendra Pradhan said after the Cabinet meeting.
In six pre-NELP exploration blocks, ONGC and OIL had traditionally borne the full burden of royalty and cess, including share of JV partners. But the Cabinet has now allowed the two state firms to bring down their liability to the extent of their respective participating interests in these blocks, leaving partners such as Hindustan Oil, GSPC, and Essar Oil to bear their respective share of royalty and cess.
Full burden of taxes on state firms had made state firms reluctant to invest in these fields, resulting in declining output. These statutory levies have also been made cost recoverable with prospective effect for these fields.
The government has extended the exploration period by two years and appraisal by one year in operational blocks in the North-East given the geographical and logistical challenges there. Besides, natural gas from discoveries in the North-East that hadn’t begun producing on July 1 this year can be sold at market rates, a benefit currently available to gas from deep sea. ONGC, Oil India, Jubilant, Hindustan Oil and Essar Oil could benefit from this move.
The government has also extended tax benefit under Section 42 of the Income-Tax Act prospectively to 13 operational contracts signed for pre-NELP discovered fields. This is likely to benefit GSPC, Sun Petrochem, Hindustan Oil and Selan Exploration.
Sec 42 allows companies to claim 100% of expenditure incurred under a production sharing contract as tax deductible to compute taxable income in same year. Jaquiski Tartt Authentic Jersey
Share This
