Budget Analysis – Union Budget 2019-20


Budget Analysis – Union Budget 2019-20

The Federation of Indian Petroleum Industry (FIPI) organised its flagship Budget Analysis Session, in association with EY as the knowledge partner, on Monday, 8 July, 2019 at India Habitat Centre, New Delhi. The objective of the session was to analyse the recently presented Union Budget 2019-20 and weigh the impacts of the Budget with respect to Indian oil and gas industry. The session was attended by Mr Sanjiv Singh, Chairman, FIPI and Chairman, IndianOil along with Mr P K Jain, Former DG, GST Council; Mr S P Garg, Member, PNGRB among other eminent personalities from across the oil and gas value chain.

The Welcome remark at the session was delivered by Mr Rajiv Bahl, Director (Finance, Taxation and Legal), FIPI. Mr Bahl underlined the fact that the oil and gas industry in India contributes around INR 6 Lakh Crores annually towards the Government Exchequer and the Government should restore the tax holidays and extend further support to the industry in form of tax incentives.

Dr R K Malhotra, Director General, FIPI, in his opening remarks, underlined the need for inclusion of the sector under the ambit of GST. In this regard, he underlined FIPI’s relentless efforts in advocating for the inclusion of Crude oil, natural gas and other petroleum products under GST at various levels in the State and Central Government. Dr Malhotra also apprised the participants about the FIPI’s ongoing study on impact of non-inclusion of oil and gas sector under GST and that the findings of the report will support the industry’s advocacy efforts with solid facts.

Setting the context for the session, a detailed analysis of Union Budget 2019 and its implications of the oil and gas sector and the wider economy was presented by EY. While Mr Raju Kumar, Partner, EY presented on Direct Tax Implications; Mr Achal Chawla, Partner, EY and Ms Preeti Sharma, Director, EY made presentations on GST Implications and Personal Tax Implications respectively.

The main highlight of the session was the ‘Panel Discussion on GST’, focussing on the experiences of oil and gas companies on completion of two years of GST. The panel comprised of Mr P K Jain, Former DG, GST CBEC; Mr S P Garg, Member, PNGRB; Mr Subhash Kumar, Director (Finance) ONGC; Mr Karikeya Dube, Director (Finance) & Vice President Tax, BP India Mr A K Tiwari, Director (Finance), GAIL and Mr Sandeep Kumar Gupta, Director (Finance) – Designate, IndianOil. The panel discussion was moderated by Mr Harishanker Subramaniam, Partner, EY. During the course of the discussions, it was highlighted that the five key petroleum products have not been included under the GST due to looming uncertainties over revenue implications of inclusion on States and the Central Government. As a next step, it was suggested that the Government should consider including natural gas and ATF under the GST regime as they have the least impact on the State Government revenues. However, some of the panellists pointed out inclusion of natural gas will only increase the stranded input credits for the refineries as they use natural gas both as a fuel and a feedstock. Hence, the Government should consider all five petroleum products together for inclusion under GST. Mr P K Jain highlighted that it is expected that the petroleum products may attract a combination of GST and excise & VAT so as to maintain the Government’s share of revenue and also to ensure that the end prices for the consumer do not go up. He was of the opinion that inclusion of petroleum products under GST in a phased manner would be a better approach.

It was highlighted that presently India imports over 80 per cent of its crude oil and above 50 per cent of its natural gas requirements. The Government has set an ambitious target of increasing the country from a present USD 3 Trillion economy to USD 5 Trillion in next few years. This will require India to grow at a YoY rate of over 8 per cent. This will make India the largest energy market in the next few years. Presently, due to non-inclusion of the sector under GST, oil and gas companies are struck with huge input tax credits and are being subjected to dual taxation, which is resulting in a 10 – 12 per cent increase in cost of capital. To achieve the Government’s objective of a fast-paced growth. it is imperative that petroleum products are included under the GST at the earliest.

Delivering the closing remarks at the session, Mr Sanjiv Singh mentioned the need for the oil and gas industry to take advantage of the small and big opportunities in the market, highlighting that the Government’s focus on infrastructure will also benefit the oil and gas market. He further emphasised that the oil and companies must align their strategies with the vision of the Government for the larger benefit of the country.

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