Budget wish list
New Delhi   06-Feb-2008
<span style=color:brown>Oil and Gas CEO-Speak Sarthak Behuria, Chairman, IndianOil "The Customs duty on crude oil should be brought down to zero. There should be an excise duty reduction for pipeline projects akin to what the government gave for refineries last year".</span> <b>Chamber-speak CII</b> Exploration and production activities related to oil and gas should be exempted from service tax. Service tax of 12 per cent on this sector will increase the already-high cost of exploration and have an adverse and direct impact on the exploration business. Natural gas should be included in the list of "declared goods" under Section 14 of the Central Sales Act. Also, the VAT rate of 12.5 per cent should be lowered, as it is affecting the consumers, particularly power and fertilizer sectors. <b>FICCI</b> The sector seeks fiscal stimulus from the government to promote entrepreneurs to undertake developmental activities. There is a need to streamline excise duties on Motor Spirit and high-speed diesel from the current ad valorem-cum-specific rates to only specific rates. The hydrocarbon sector should be treated on a par with the power sector, and accordingly, a 10-year tax holiday under Section 80IA of the Income Tax Act should be granted. <b>State of play</b> <b>Deepak Mahurkar, executive director, Pricewaterthouse Coopers</b> Service tax incurred by entities engaged in exploration and production of crude oil and natural gas ends up as "stranded cost1 since the entities cannot take Cenvat credit A scheme for "refund of service tax paid by E&P entities" on services consumed for exploration and production purposes may be formulated. This can be similar to the scheme for refund of service tax paid on specified services used for export of goods and services. Natural gas is taxed at a price of 12.5 per cent in most states, whereas other primary fuels like crude and coal enjoy the status of "declared goods" under sales tax/VAT laws and are taxed at 4 per cent despite being less environment friendly, in order to provide a level-playing field among different primary energy sources, natural gas and liquefied natural gas may be given the, status of "declared goods" under Section 14 of the Central Sales Tax Act, 1956. Taxes taken together (excise, Customs and sales tax) account for 54 per cent and 32 per cent of prices of petrol and diesel, respectively, in Delhi. Whenever their basic prices are increased, the ad valorem tax rates have a cascading effect. The ad-valorem component on petrol and diesel may Bernadine" and effective rate of excise duty’ on petrol and. diesel reduced. Section 80-IA of the Income Tax Act provides deduction to an undertaking carrying out the business of laying and operating cross-country natural gas distribution network, including pipeline and storage facilities which are an integral part of such network fulfilling interalia following conditions; if at-least one-third of the total pipeline capacity is available for use on a common carrier basis by any person other than the assessee or an associated person. The term "cross country gas distribution network" is not defined. Disputes may arise as to what facilities are integral parts of the network. The I-T Act provides that a third of the total pipeline capacity be available for use on a common carrier basis by a third party, whereas the pipeline policy provides that a third of the committed pipeline capacity be available for a third party. These issues should be clarified.