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RIL maytake a 200cr hit on sales tax on KG gas
September, 21st 2011

After all its troubles with scaling up production at the KG-D6 block, now there may be a tax googly on Mukesh Ambani-controlled Reliance Industries.

Department of revenue under the finance ministry has said that RIL is liable to pay taxes in accordance with the laws in the states. This has come as a clarification after the Supreme Court admitted a petition by the Uttar Pradesh government, challenging a stay on the levy of local taxes on sale of gas.

The department said that VAT and central sales tax is a state subject and can be levied on the sale of gas. It has clarified that a 2 per cent VAT can be levied by the state government. Finance Ministry has refused to become a party in the case.

RIL did not respond to NDTV's queries, but a back of the envelope calculation indicates an additional burden of around Rs. 200 crore on RIL at present rate of production. Also the experts believe that for its correct on central govt's part not to interfere in the state governments turf.

When we are moving toward GST, state governments are anyway skeptical about interference of central govt. In that context also, it is a right move of Finance Ministry, not to interfere in these small issues, said Shailendra Kumar, CEO of Taxindiaonline Group.

Comments of revenue department on applicability of VAT and CST on sale of gas, and state government having the power to charge all local taxes, may look like negative for RIL. But then, all these are a pass through cost, so probably RIL too, would pass on

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