Oil drilling rigs import exempt from GST to boost local output

New Delhi: Import of oil drilling rigs has been exempted from the Goods and Services Tax (GST) levy to give a boost to domestic exploration and production, the government said on Wednesday.

Nearly all deepsea drilling rigs are imported while a bulk of ones used in shallow waters to drill wells to probe and produce oil and gas are also of foreign origin.

Petrol, diesel, jet fuel (ATF), natural gas and crude oil have been kept out of the GST regime, resulting in continuation of cascading effect of tax-on-tax.

The issue figured during the meeting Prime Minister Narendra Modi had with CEOs of top international and Indian energy firms on Monday.

They demanded inclusion of the fuels particularly natural gas in the GST regime.

Revenue Secretary Hasmukh Adhia had briefed that meeting about some of the decisions that the GST Council had taken at its last meeting on October 6 to give some relief to the sector that has been majorly hit because of GST paid on inputs not being able to set off on taxes paid on final product.

The CBEC today issued a statement detailing the decision taken at the Council meeting that would "incentivise investments in the E&P (exploration and production) and downstream.

"Import of rigs and ancillary goods imported under lease will be exempted from Integrated-GST, subject to payment of appropriate IGST on the supply/import of such lease service and fulfilment of other specified conditions," it said.

Offshore works contract services and associated services relating to oil and gas exploration and production in the offshore areas beyond 12 nautical miles shall attract GST of 12 per cent as against 18 per cent previously decided.

Also, transportation of natural gas through pipeline will attract GST of 5 per cent without input tax credits (ITC) or 12 percent with full ITC.

GST rate on bunker fuel has been slashed to 5 percent, both for foreign going vessels and coastal vessels, from 12 percent currently.

"Notifications to give effect to these proposals will be issued shortly," the statement said.