Budget may exempt oil exploration cos from service tax

[Sukumar]

Budget may exempt oil exploration cos from service tax

NEW DELHI - Companies exploring oil and gas in the country are
likely to be exempted from paying service tax of 12% in the Union
Budget of 2008-09 (Apr-Mar), Business Standard reported today.
Finance Minister P. Chidambaram will present the Budget in
Parliament on Feb 29.The tax, which was introduced for oil exploration
companies in last year's budget, has been resisted by the industry.
"Since exploration for oil and gas is a high-risk business, and not
every project results in a discovery, the finance ministry will take
up the issue of waiving the service tax component for oil exploration
companies in the coming Budget," the report quoted a senior government
official as saying.
Total service tax collections in the current financial year are
expected
to be 500 bln rupees, of which around 6 bln rupees has been
contributed by the exploration and production companies.
"We need to encourage more global companies, which have the right
technology to find oil and gas in the country, in order to meet our
growing energy needs," the ministry official said.
Service tax is usually paid by firms providing services at the
drilling
locations of the oil companies.
The tax is, however, a pass-through, which increases the overall
cost of services for the oil firms.