The Big news has come for the Oil Refineries as there is an announcement for relief in regards to the GST payment against the job outsourced by these oil companies. As earlier, it was speculated that whether the Oil companies have to pay the GST on the total valuation.
But due to the announcement made by the Revenue Authorities that the payment of GST would only be required on the Value Addition done by the Job workers and not on the Total valuation, the Refineries are now feeling glad.
This news has come as a ‘Relief in Time‘ by the Revenue collection Department as the Companies were already stressed by the rising rates of Dollar and struggling financially due to the second reason, i.e. the increasing price of Crude oil.
We know that many Oil refineries get some of the processes outsourced by the Job workers and as a process, they provide Raw materials to these Job workers and they supply the final products to the Refineries. Thus, If the GST would be charged on the Total valuation, this would be a matter of concern for the Companies, as they already make payment to these Job workers for the services they are providing to these companies.
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But the Tax authorities have asked the Oil Refineries to pay Tax on just the Value added by the Job workers and not on the total valuation.
The Activities done by the by the Job workers by the Oil Refineries are now clearly defined and has categorized under the ‘Job work’.
Its known that the Petroleum products are kept apart from GST. But, if the Oil companies were to pay GST on the total valuation, it would have become quite difficult for them to pass on the included cost to the customers and at the same time extraction of the income tax credit would also have been problematic.
The estimated impacted amount could be between the range of ₹500 crore to ₹4,000 crore for the Top Oil Companies, which is a huge amount.
Despite the Oil companies are not exempted completely by the GST payment and have to pay GST on the job outsourced, it has been a matter of great relief that they now do not have to pay GST on the complete valuation and only on the value addition.
