Oil firms seek Customs waiver on capital goods for new refineries

State-owned oil marketing companies are seeking zero customs duty for capital goods imported for the new refineries coming up in Punjab, Bina in Madhya Pradesh and Paradeep in Orissa.

The demand, part of the wishlist being prepared for the finance ministry for Budget 2007, is aimed at attaining a level playing field for the new refineries being set up. A similar incentive has been extended to private sector companies like Reliance Petroleum.

At present, the rate of duty is 27.48 per cent (5 per cent basic, 16.32 per cent countervailing duty, 2 per cent education cess and 4 per cent special additional duty).

Among other demands, state-owned downstream companies like Hindustan Petroleum Corporation are seeking customs duty protection of at least 10 per cent between crude and petroleum products, duty relief on imported crude used for domestic cooking gas and PDS kerosene as well as concessional Customs duty for capital goods imported for green fuel and pipeline projects.

The companies also want exemption of excise duty for captive consumption of petroleum products as fuel or otherwise, as well as the exemption for export to Nepal to be extended to all oil marketing companies. Another demand relates to cenvat credit on the Oil Industry Development Board cess on crude.

On the income tax front, a demand for a tax holiday for cross country pipelines has been raised. The companies also want a tax holiday for new inland refineries from the year of making profits instead of the year of commercial production.

Another issue being raised pertains to the 10.2 per cent service tax payable by goods transport agencies. While the SK Bhardwaj committee, constituted due to the transporters stir after the 2004 Budget, had specified conditions for making the levy applicable, a representation on the issue was disposed of by the CBEC upholding the liability despite the contradictions.

"With little freedom for the oil marketing companies to pass on the burden, there is justification to exempt the levy at least for subsidised products like LPG and kerosene," sources said.