Resolving the contentious Paradip refinery tax incentive row between Indian Oil Corp (IOC), the country’s largest fuel retailer and the government of Odisha, IOC today made payment of Rs 2,935 crore towards Value Added Tax (VAT) payment for the period between November 2015 and July 2017, the company said in a statement today.
“With the active support and engagement of the Ministry of Petroleum & Natural Gas, Government of India, in the resolution of the issue of VAT deferment for Indian Oil Corporation's Paradip Refinery in Odisha, IndianOil has paid Rs. 2,935 crore to the Government of Odisha today towards VAT payment for the period Nov. 2015 to July 2017. The Refinery had commenced commercial operations in November 2015,” IOC said.
The company added that the meeting between Oil and Skill Development Minister Dharmendra Pradhan and Chief Minister of Odisha last month was instrumental in resolving the pending issue.
Odisha government, as per the revised tax incentive agreement, agreed upon extending the deferment of VAT on products produced by Paradip Refinery and sold in the state to 15 years from 11 years decided earlier with a cap of Rs 700 crore per year.
Based on the follow-up discussions held by Joint Working Group under the petroleum secretary it was agreed that Odisha government will henceforth receive regular VAT or GST revenue from IOC, of which Rs 700 crore per annum will be given as interest-free loan to the fuel retailer for 15 years.
Complimenting the government of Odisha and IOC for agreeing on a middle path and a mutually acceptable solution, Pradhan, said that the new arrangement will give a big boost to industrial growth in Odisha.
Pradhan urged the state government to facilitate IOC’s expansion plans in order to create downstream petrochemical and allied industries in Odisha. He added that over a period of time, this will enable the state to increase its revenue and also create additional employment avenues. It will also lay the foundation for a new industrial ecosystem, facilitating industrialisation and fiscal consolidation, he said
IOC in 2004 signed a binding Memorandum of Understanding (MOU) with the government of Odisha whereby the state government extended several incentives to the fuel retailer for setting up Paradip Refinery.
One of the major incentives was in the nature of interest-free loan equivalent to the sales tax or VAT payable to Odisha on sale of products during the first 11 years of operation of the refinery from the date of commencement of commercial production. IOC commenced the construction of the refinery in March 2009 and started commercial operations in November 2015.
After completion of the refinery, the state government decided to review the fiscal incentive and withdrew it citing reasons of delay in completion of the project, favourable economic conditions and increase in the size of the refinery from 9 to 15 million tonnes per annum.
IOC had approached the High Court of Odisha against the withdrawal of the fiscal incentive this year. The High Court granted a stay in favour of the fuel retailer and asked both the parties to settle the issue through a Joint Working Group.