The Hindu : Business : ‘States can only levy sales tax on crude oil’

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Wednesday, Sep 09, 2009
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‘States can only levy sales tax on crude oil’

Special Correspondent

NEW DELHI: The Union Petroleum and Natural Gas Ministry has informed the Rajasthan Government that only Central Sales Tax (CST) can be levied on crude oil sold from Cairn India’s fields in the desert State to refiners in other parts of the country.

The Rajasthan Government wants to charge three per cent higher State sales tax or VAT on 8.75 million tonnes a year of peak output from Cairn India’s Barmer fields despite oil being consumed or processed at refineries outside the State.

In a letter to Rajasthan Chief Secretary Kushal Singh, Petroleum Secretary R. S. Pandey has stated that State sales tax or VAT would accrue to the Rajasthan Government in case the sale of crude oil is made for further processing within Rajasthan.

“One per cent CST would accrue to the Rajasthan Government if the sale is made in Rajasthan and crude oil has to be necessarily carried outside for refining,” Mr. Pandey has stated. However, CST is due to be abolished by March 31, 2010, and replaced by Goods and Services Tax (GST).

Mr. Pandey cited opinion of the Department of Revenue in the Union Finance Ministry to make a point to the State Government.

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