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ONGC considering 12% service tax reimbursement

Mumbai: Offshore marine logistics services providers may see an easing in their current cost crunch if India's Oil and Natural Gas Corporation follows through with its indication that it is "inclined" to reimburse its providers with part of the service tax paid to the Government, writes the Hindu Business Line.

This indication comes as Indian marine service providers are reeling from the government's clarification that a 12% service tax applicable to marine logistics services, including operation of offshore supply vessels, for oil exploration and production did come under the ambit of service tax. ONGC is said to have been disputing this decision on the ground that offshore oil exploration and production did not come under the definition of mining of minerals, oil and gas, which is subject to service tax.

Companies such as Great Eastern, Great Offshore, Dolphin Offshore and Garware Offshore, which have been affected by the tax have seen their bottom lines shrink as their hire charges for supplying offshore vessels to ONGC had not been set to include the tax. It is more than likely that the Indian oil giant will be forced to pay out for the tax either directly by subsidising its suppliers or in the form of higher vessel hiring charges.

ONGC, which has in operation (both hired and owned) over 125 offshore vessels off the west coast alone, pays hire charges of between $1,800 and $20,000 a day or even more depending on the type of the vessels. The hire charges are significantly more in the case of new generation vessels, which are fitted with DP (Dynamically Positioning) systems.  [29/05/08]

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