GST council cleared recently that whatever the cost of oil and gas manufacturers recovers from the sale of petroleum just before transferring benefits to the government which comes under the production sharing contract is not subjected to the goods and services tax.
As the finance ministry cleared that the extraction of oil and gas under the contracts with government is not liable for any taxes such as GST as the producers are not rendering any services. Earlier, the profit petroleum which is governments share in profits from the sale of petrol was discarded from the application of GST by the GST Council.
A circular from finance ministry stated that “Oil exploration and production contractors conduct all petroleum operations at their sole risk, cost and expense. Hence, ‘cost petroleum’ is not a consideration for service to the government of India and thus not taxable per se.”
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The producers recover their production and infrastructure cost from the sale of petroleum which is called cost petroleum. A leader from reputed research firm said that “Profit petroleum was exempted recently from GST. With the circular on Monday, there is clarity that even cost petroleum is not subject to GST. However, the tax treatment with respect to transactions between the contractors has not been dealt with in this circular.”
The finance ministry also took concerns to the hospital food supplies and said that the food supplied to the patients is a healthcare supply, therefore, is not applicable with GST while the food supplied to the attendants of patients are subjected to GST.
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