With Central assistance dwindling, the State Government has apparently decided to withdraw Value Added Tax (VAT) deferment for 11 years for the Indian Oil Corporation limited (IOCl) to generate more funds.
Sources said the State Government would soon re-negotiate a fresh memorandum of understanding (MoU) with the IOCl, from which the Government expects to collect VAT of `2,200 crore on sale of petrol, diesel, ATF, Industrial lPG and kerosene during 2016-17, and by adding 20 per cent cumulative increase every, it estimates to collect `60,000 crore in next 11 years.
Notably, the Government had signed an MoU with the IOCl on February 16, 2004 for setting of a 9 million metric tonne per annum (MMTPA) crude grass root refinery project at Paradip at an estimated cost of `8,312. The project was targeted to be completed by 2009-10.
later on March 30, 2006, the IOCl enhanced its proposed capacity to 15 MMTPA and project cost to `25,464 crore. Now, the refinery is expected to commence in October 2015.
As per the MoU signed in 2004, the Finance Department had notified for several financial incentives, including deferment of VAT for 11 years from the year of commercial production.
Clauses in MOU also included exemption of Central Sales Tax (CST) for 30 years, Entry Tax exemption on crude oil, exemption of Sales Tax of material for 11 years.
Similarly, tax on works contract was exempted up to the date of commercial production. Exemptions also include Entry Tax on machinery, equipments and other scheduled goods for construction of the project.
The IOCl has already availed tax benefit of `500 crore towards works contract and Entry Tax.
Chief Minister Naveen Patnaik has brought the issue of VAT continuance to the Prime Minister Narendra Modi and Union Minister Finance Arun Jaitley several times while informing them about tax concession to IOCl.
Finance Minister Pardip Kumar Amat had raised the topic in the Finance Ministers’ conference held at New Delhi in December 2014.
However, the Union Government is yet to respond on the issue. But the State has already mulled to go for a modified MoU with IOCl by withdrawing VAT deferment in the State’s interest, official sources said.