TAX for Consumer Sales Oil & Natural Gas

BROAD JOB DESCRIPTION AT Divisional Office

Customer related queries
Sourcing - least cost ; Cenvat Credit ; VAT set off .

SOA reconciliation Banking arrangements, NOC accounts Disbursements Discounts, Debit notes , Credit notes Creditworthiness Purchase Functions Service Tax credit set off Service Tax payment CFAs stock reconciliation , documentation Declaration Forms Collection

Consumer SALES PRODUCTS

HSD, LDO,SKO ( Industrial) Furnace Oil LSHS, Naptha MTO, Solvent,Hexane Asphalt CBFS LPG ( Non-dom.) Lubes , Greases.

SOURCING
Product Cost
( Prod. Value + Excise Duty + Sales Tax ( VAT or CST ) + Freight + Enroute levies + Entry Tax etc.

Cenvat credit VAT set off

SOURCING OF DS PRODUCTS
HSD, LPG (Non-dom.),SKO ( Industrial ) can be from either our refinery or bought out from others . Can be out of imports also. Furnace Oil / Naptha can be either from our refinery or bought out from others. All other bulk products are from our refinery. Lubes / Greases are from our Blending Plant / Repackers.

PRODUCT SOURCING
Product Cenvatable or not.
Except MS, HSD, LDO all petroleum products are cenvatable . FO, SKO ( Indl.), LPG ( bulk / industrial ) major cenvatable products . Cenvat credit to be passed on only to the extent of excise duty paid initially at refinery / LPG Fractionator. SKO and LPG should not be sold to non-PDS customers if the product is imported one.

In case of domestic source, advance indent has to be given so that correct duty payment is made .

PRODUCT SOURCING
VAT requirements vary from State to State. The following details are to be obtained from the Controlling Zonal Sales Tax Section :
Product VATTABLE or not Negative list of products under VAT

Treatment of inter oil company transactions Tax invoice requirements . VAT rates of products . ( Excel file encl.)

In case of non-VATTABLE products , it is better for the customer to buy on interstate basis against C forms.
Requirements for buying against C forms.

In some States , for products used as fuel , full VAT set off is not there .

 Customers who are taking cenvat credit

Central Excise

Product Locn Regn.- Cenvat invoice ( JDE / manual / external package ) RG23D Register Filing returns .

Regn. No. is based on PAN no. of OMC : AAACH1118B.

Manufacturer ( Refinery , Lube Plant , CNG mother stn.) Regn. No. suffix XM .

Depot of Manufacturer : Receiving product only from our refinery / Lube Blending Plant : regn. No. suffix XD.
First Stage Dealer : receiving product from other Companies : Regn. No. suffix XD.

Cenvat credit should not be passed on more than the duty amount paid by refinery / blending plant .

CENVAT CREDIT (PASSING OF )

Currently Cenvat Credit is applicable on all petroleum products except MS, HSD and LDO. Locations selling products other than MS, HSD and LDO should have excise registration to pass on Cenvat Credit. Registration , issuance of cenvatable invoices , filing half yearly returns separately for each regn. segregation of products covered by different registration. Applicable for Lubes ( in case if cenvat credit is passed on by the Locn . ) .
Regn. as Dealer / Depot of Manufacturer / First Stage Dealer . Depending on source of product ; multiple source multiple regn.

Note: As per our records except Khapri Depot, no other POL depot is having excise registration to pass on cenvat credit in Maharshtra , Goa and M.P. (Mumbai based Terminals and Lube Depots are also having excise registration)

Since many depots selling FO are coming under Retail RO, the above aspect has to be kept in mind.

VAT REQUIREMENTS
Updation of TIN no. of customers in CMR No VAT benefit on credit notes to customers as a rule under VAT
Exceptions : Railways, Customers buying products as fuel.

All VAT / Sales Tax credit notes to be approved by Zonal Sales Tax Section.
VAT assessment is monthly .
Credit notes to customers on monthly basis. At the end of the financial year no credit notes Corporation to be out of pocket.

SOURCING
Product Applicability of Entry Tax on the product in Customers hands .

Varies from State to State ; Details to be obtained from controlling Zonal Sales Tax Section.

Coverage of Petroleum Products under VAT

In all States under WZ ( Maharashtra , Goa and M.P.) all Petroleum Products including MS and HSD are under VAT . Maharashtra All products except MS and HSD attract multipoint VAT . MS and HSD attract VAT only upto level of Oil Company selling to Dealer. M.P. Exemption for transactions between IOC, HPC,BPC and IBP . MS, HSD, SKO No set off . Other Products full set off . Goa All products attract VAT at first point without VAT set off .
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 M.P. Exempt for transactions amongst IOC, HPC , BPC , IBP .

Status of Inter Oil Company Transactions

No exemption for GAIL ; Taxed at full rate with VAT set off.

Maharashtra , Goa - no exemption

Maharashtra - all major products taxable @ 4% with VAT set off . Goa all major products taxable at full rate without VAT set off.

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VAT Input Credit Maharashtra

Available on all items purchased for the purpose of business except for a small negative list . All items including capital goods are eligible for 100% set off in first year itself.
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NEGATIVE LIST UNDER MVAT RULES

AS PER RULE 54 , NO SET OFF IS AVAILABLE ON THE FOLLOWING : Motor vehicles ( passenger vehicles) , its parts , components and accessories thereof. Motor Spirits ( Petrol, HSD, ATF ) unless it is meant for resale ( local , interstate , export ) or for interstate stock transfer. Crude oil when used by an Oil Refinery for refining

NEGATIVE LIST UNDER MVAT RULES ( Rule 54 continued )

Consumables or capital assets acquired by a dealer principally engaged in doing job work / labour work and not in the business of manufacturing of goods for sale . Purchases made by a dealer having entitlement certificate (availing Package Scheme of Incentives). Goods of incorporeal or intangible nature (other than import licence, export permit / licence / quota , credit of duty entitlement pass book , SIM Cards , software package in the hands of a dealer trading in software , copyright which is resold within 12 months of date of purchase).

NEGATIVE LIST UNDER MVAT RULES ( Rule 54 continued ) Purchases effected by way of works contract where contract results in immovable property other than Plant and Machinery. Purchase of any goods ( the property in which is not transferred whether as goods or in some form to any person ) which are used in the erection of immovable property other than plant and machinery. Indian Made Foreign Liquor or Country Liquor if dealer has opted for composition. Note : Items given in red are applicable for OMC.

REDUCTION IN VAT SET OFF (RULE 53 OF MVAT RULES) Purchase of Office equipment , furniture , fixture where such goods purchased are treated as capital assets by the dealer claiming set off , then 4% of the purchase price is to be reduced from VAT set off (i.e.) VAT set off is available in excess of 4% of VAT paid .

REDUCTION IN VAT SET OFF (RULE 53 OF MVAT RULES) Purchase of finished goods for resale by availing VAT set off stock transfers outside State 4% of purchase price is to be foregone.
VAT set off availed on inputs used in manufacture of fin. Goods stock transferred outside State 4% of purchase price is to be foregone.

VAT Input Credit Other States

Goa
No set off for petroleum products ; OMC does not have any manufacturing facility in the State.

M.P.
No set off for petroleum products except LPG . No manufacturing facility for OMC in this State.
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VAT SET OFF REQUIREMENTSMAHARASHTRA

Seller should have registration under Maharashtra VAT Act and his VAT Registration no. ( TIN no.) should be mentioned in the Bill . The Word Tax Invoice should be there on the Bill compulsorily.
Other words Invoice , Sale invoice , Commercial Invoice , Bill etc . may or may not be there.

The following certificate should be there on the Bill :

I/We hereby certify that my/our registration certificate under the Maharashtra Value Added Tax Act, 2002 is in force on the date on which the sale of the goods specified in this tax invoice is made by me/us and that the transaction of sale covered by this tax invoice has been effected by me/us and it shall be accounted for in the turnover of the sales while filing of return and the due tax, if any, payable on the sale has been paid or shall be paid.

VAT ( contd.)
STOP CODES Delivery order
000 exempt 001 against Form C declarations 002 to 099 CST Sales 100 Local VAT / Sales tax 101-399 Local VAT

Local Sale vs. interstate sale

Seller (OMC) and buyer in same state Local; otherwise interstate sale.

Intransit sales requirements Usage of correct STOP CODES and tax rates

Purchase against C forms

Items used in manufacture/ processing of goods for sale For resale For generation or distribution of electricity or power For mining For goods being used in telecommunication network Rate of tax against C form : 4% ( upto 31.3.2007), 3% ( w.e.f. 1.4.2007) , 2% ( w.e.f. 1.6.2008) Without C form : Till 31.3.2007 local rate in despatching State or 10% whichever is higher ; w.e.f.1.4.2007 it is local rate in despatching State.

Requirements in C forms
Valid Registration number in C form Date of registration should be prior to invoice date Invoice no., invoice date, invoice value should be recorded either in front side or reverse side of C form and signed and stamped with designation . If details are given separately in attachment , it should also be signed by same person signing the declaration form. (Otherwise invalid attracting full rate of tax.) w.e.f.1.10.05 one C form can cover transactions covering one calendar quarter if purchase order is given by customer . Otherwise value limit is Rs. 1 lac. per C form . Upto 30.9.05 transactions of one financial year can be covered in a C form subject to above conditions.

SALES TO GOVT. DEPT.

Form D was applicable to sales to Govt. Department till 31.3.2007. ( CST sales ).
Preprinted by respective Govt. Dept. Rates , same as for C forms.

Upto 30.9.05 one D Form can cover transactions for a full year subject to availability of purchase order ; During 1.10.05 to 31.3.2007 transactions of one calendar quarter only can be covered.

DECLARED GOODS
Declared Goods ( iron & steel , Crude oil , LPG for Domestic use )
Taxability within State local sale cant exceed 4% Without C form interstate sale 4%

IN-TRANSIT SALES UNDER CST ACT

Sales tax rate : NIL Sales during transit :
Other refinfery OMC Customer ; OMC reseller end customer.

OMCs sale reported in either original despatching State or in receiving State. Endorsement of documents of title ( LR, RR , BL) OMC to give C form to selling Oil Co. Collect C form from buyer and get E1 form from Selling Oil Co.
Submit both C form of buyer and E1 form to sales Tax authority to claim exemption from tax.

Requirements are to be followed for doing intransit sales

Our buyer should have a valid CST Regn. Certificate wherein the subject goods are covered for resale purpose.

When OMCs customer makes an intransit sale , OMC would give E1 form to its customer.

States of WZ under VAT

Effective

Maharashtra Goa M.P.

Apr 05 Apr 05 Apr 05

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UPDATION OF TIN NOS OF CUSTOMERS

Under VAT Acts, each State Govt. is insisting on printing of TIN no. on the invoice. ERP says , hardly 10% of our customer base is having TIN no. updated .

If TIN no. is not there in the invoice , VAT set off would be disallowed shortly by the Govt. to the customers.
E-return under VAT Act is being made mandatory . Absence of Customers TIN no. would make OMCs e-returns invalid and attract penalty.

Service Tax
Statutory liability
Ex-MI delivery assistance cases Alongwith freight , service tax also should be passed on and claimed from customers Valid Tax invoice should be given Delivered supplies ( both sales and stock trasnfers ) of MS, HSD,SKO,LPG,ATF service tax regn. , payment at Zone . All other products at respective Terminals or Regional Offices. No service tax when freight on individual transaction ( single consignment ) < Rs. 1500/- and multiple consignment < Rs. 750/- );

Service Tax
Cenvat Credit on service tax paid :
Wherever service tax is paid by OMC , for taking cenvat credit and passing of credit to Refinery , details are to be sent to WZ . Details include valid tax invoice copy from service provider , data in the given format ( both hard copy and soft copy).

APPLICABLE TAXES
Income Tax ( TDS ) VAT ( Set off ) VAT ( TDS ) Service Tax ( payment ) Service Tax ( Set off ) Differential Excise Duty ( Branded Fuels) Excise Duty ( passing of cenvat credit) Octroi / NMMC Cess ( Payment , Pricing , Inventory valuation) Entry tax Property Tax

INCOME TAX ( TDS)

On payment :
To be guided by HQO Tax circular being sent in April first week every year . TDS rate is decided based on nature of payment ( rent / commission ) and person receiving payment ( Individual / Firm / Company ) Deduct applicable TDS while making payment .
PAN NO. compulsory for each Payee.

Deposit on due date ( on or before 7th of the following month ) .

Compulsory e-payment mode

INCOME TAX ( TDS)

On payment :
Filing of Quarterly returns
Acknowledgement.

Issuance of TDS certificates.

On receipt : ( Rent , Interest etc.)

Original TDS Certificate to be collected . Journalisation in line with HQO circular dt. 18.2.08 (sent already to all R.Os). TDS certificate is to be sent to HQO TAX , PH-5 directly immediately on journalisation in the same month when it is received.

INCOME TAX ( TCS)

Tax Collected at Source on scrap sales.
Applicable only to manufacturing locations.

SERVICE TAX
Statutory Liability Cenvat Credit ( Input Service Credit Distributor )

SERVICE TAX ( STATUTORY LIABILITY)

Goods Transport Services Storage and Warehousing Services } LPG Filling ( Packing ) } Pipeline Transportation Charges }
Based on data from RO / HB

Based on freight details received from ROs / Terminals

Rental for Immovable Property ( w.e.f. 1.6.2007 ) supply of tangible goods for use or service (SSLF ) ( w.e.f. 16.5.2008 )
Based on data from ERP

Based on data from Oil Exchange Section , Zone.

RENTAL FOR IMMOVABLE PROPERTY

Applicable for ARB income ; w.e.f. 1.6.2007 ; Rate : 12.36%
ATM , Convenience Store, Food Court etc.

HQO Tax has gone through 33 agreements given by Retail SBU and advised applicability / non-applicability of service tax ; this was sent to all R.Os. in June07. Each RO collecting ARB income has to see whether the agreement is covered in the circular .

If not covered , to give the details to Zonal Tax for taking up with SBU and HQO Tax.

RENTAL FOR IMMOVABLE PROPERTY

If covered , RO should issue Tax invoice in the format circulated already to ARB partner and collect service tax applicable . Invoice copy and Cash receipt copy to be forwarded to Zone Tax for making payment. Service Tax portion to be coded to 10000.324930.11350. Zone would handle payment of tax , filing of returns .

SERVICE TAX CENVAT CREDIT REQUIREMENTS

Service Provider should have registration under Finance Act , clearly specifying the Service Head under which he is covered .
Currently there are 106 services and there is a possibility one service can be covered under multiple heads . Though generally service tax rate is 12.36% , in some cases abatement is there reducing the rate of tax .

Service Tax Registration no. should be mentioned in the Bill .

SERVICE TAX CENVAT CREDIT

Except when a Locn. handles exclusively imported products, cenvat credit on service tax is available on all service tax payments . ( as per HQO Tax Circular).
So whenever service tax payment is made by a R.O. , the service tax element should be coded to 10000.266820.11350 account .
Either through set up in JDE or through Line 4 adjustment.

ENTRY TAX
Currently in Maharashtra , Entry tax is applicable only on Petroleum Products and Motor cars . Goa
no entry tax on products brought for resale . no entry tax . MS, HSD, LPG ( Indl.) 1% Lubes 2% LPG (Dom.) 6.47% Cylinder , Valve , Regulators 1%

M.P.

OCTROI / NMMC CESS

Check up on applicability
Octroi abolition in many areas .

Payment through current account or Deposit

Journalisation on a monthly basis .

Whether exact amount is included in Pricing. Details for inventory valuation ( tax paid inventory)

PROPERTY TAX
Any revision in rateable value leading to increase in tax payment should be contested .
Normally within 15 days of receipt of proposal to raise addl. demand , objection should be lodged .

Any communication received including bill for property tax should be stamped with date of receipt .
To calculate the time bar .

Comparison with nearby Properties as well as facilities like ( water ,drainage etc. ) to be seen .
While giving details to local authority about the asset value , details like interior furnishing etc. should be avoided since there is no property tax on the same .

PURCHASE AGAINST DECLARATION FORMS ( C FORMS )

OMC can buy following items against Form C declarations :
Items meant for resale ( finished products ) Ethanol Goods used in generation of electricity ( Generators) Goods used in telecommunications network

While buying applicability of VAT set off if bought locally or negative list under VAT Act should be considered.

SCRAP SALES
Sales Tax element should be coded to 10000.325530 ( local ) or 325440 ( CST) . Two Digit code in Cash receipt. Copy of CR and invoice and C form if applicable should be sent to WZ Tax Section on a monthly basis .

CONCESSIONAL FORM
In order to avail concessional rate of Tax or nil rate of Tax various forms have to be submitted by the buyer to the seller and in the case of sale in transit even the seller has to submit forms prescribed in the Act. They are form C, Form F, Form H, Form E-I and Form E-II. Form C In case of Inter-State sale by buyer Form E IAnd E II-In case of in-Transit Sale by seller (6(2)(b) sale). Form F In case Stock Transfer /branch transfer by branch. Form H In case of Exports of the goods by exporter Form I by Special Economic Zones.

 Blank C form without invoice details serves no purpose While sending the C forms to Zone , supply pointwise , quarterwise to be sent to controlling Zonal Tax Section. Customer no. should be given in the C form. Immediately after collection of C form ( complete in all respects ) the same should be entered using the ERP facility for online updation of forms ( circular sent on 13.6.08 to all R.O.s) for which already access has been given to all R.Os.

ONLINE UPDATION OF DECLARATION FORMS

DECLARATION FORMS COLLECTION

Hence It needs to established proper control and monitoring system to collect and submit the concessional form /complying with legal requirement within two month from the end of the quarter to minimize OMCs Tax burden.

AREA OF CONCERN
The following Tax demand are outstanding due to non submission Form C and Form H etc. Zone Amt (in lacs) EZ 78325.60 NZ 18895.18 SZ 33947.14 WZ 83463.64

POINTS TO BE KEPT IN MIND

1. Price quotations should not have full break up of price as has been communicated vide HQO Pricing circulars also. At best it can start from Assessable Value(as base price), Duty, Sales Tax/VAT. 2. Concessional Forms monitoring module provided by ERP should be fully utilized to monitor, collect forms and forward to respective Sales Tax controlling Zone. 3. Tax saving in logistics may be discussed with concerned Tax functionaries before quoting to customers. 4. Discounts if any to be extended on prospective basis to avoid VAT under recoveries.

ACTION POINTS
Usage of correct STOP CODE in delivery orders No open sales orders at the month end.
Helps in correct payment of sales tax to Govt.

Immediate collection of declaration forms and forwarding to Zonal Tax. Prompt response on pending declarations.

INDIRECT TAX
Tax, which is levied on the goods and services and indirectly borne by the ultimate consumer i.e. levy on/payment by Manufacturer/importer / Seller/service provider, and recovery from the consumer/service receiver.

TYPES OF INDIRECT TAXES

Excise duty on manufacturer VAT on seller Central Sales Tax on seller Service Tax on service provider Entry Tax / Octroi on purchaser Work Contract Tax on work contract Custom Duty on importer

RATES OF INCOME TAX

For Companies :Income Tax Rate
Surcharge* > 30%

10%

>
> > 2% 1%

Education Cess Higher Ed. Cess

*In case the total income exceeds Rs. 1

Crore, Surcharge shall be paid @ 10% on Tax

(A) Direct Tax (B) Indirect Tax Direct Tax is paid by the tax payer himself on his income/Wealth directly( Which includes deemed incomes) . OMC pays following Direct Taxes:(i) Income Tax @ 33.99% (30%+10%+3%) (ii) Wealth Tax @ 1% on the net wealth (excess of Rs 1500000) (iii) Dividend Distribution Tax @ 16.995% (15%+10%+3%) (iv) Fringe Benefit Tax @ 33.99% on qualifying amount (as per slide) (v) TDS on payments to Indian parties U/S 192,194A to 194LA R/W Section 197

Major Expenses Attracting FBT

Fringe Benefit (For OMC Employees) Company Owned/ Leased Car Employee Car reimbursement (Field/ Non- Field Staff) -Actual Conveyance Reimbursement -Employee Conference in Hotels Safety / Festival awards / other Staff welfare expenses -Guest House / Holiday Home Fringe Benefit Value 20% 20% 20% 20% 20% Coverage

Repairs, Maintenance, Fuel & Depreciation or Actual Cost Actual Cost Actual Cost Actual Cost Actual Cost

20%

Actual Cost

-Travel Expenditure

5%

Actual cost

-Expenditure/ Payments for -Out of Pocket Expenses, -Furniture/ Computer maintenance -Electricity for Office at House -Hotel/ Boarding Lodging Expenses -Other Reimbursements Expenses on Office / Residential / Mobile Phones Entertainment Scholarship Medical Insurance Premium Sales Promotion Expenses

20%

Actual Cost

20% 20% 50% 20% 20%

Actual Cost Actual Cost Actual Cost Actual Cost Actual Cost excluding Statutory / Product Advertisements / sponsorship in any mass media,

RATES OF INCOME TAX

For Individual :Up to 1,50,000 1,50,000 3,00,000 NIL 10%

3,00,000 5,00,000
Above 5,00,000

20%
30%

In case the total income exceeds Rs. 10 Lakhs, Surcharge shall be paid @ 10% on Tax. In case of women individual the basic exemption is 180000 and in case of Individual (Age above 65 yrs) basic exemption is 2,25,000 instead of 1,50,000 and other remain same. Education Cess @3% will be applicable on income tax + surcharge.

TDS Rates
Individual HUF/AOP/ BOI/ Firm Nature of Payment Domestic Company Income does not Exceed Rs. 1 crore 20.600% Income Exceeds Rs. 1 crore 22.660%

Sectio n

Income does not exceed Rs. 10,00,000/10.300%

Income exceeds Rs. 10,00,000/11.330%

Interest on 'securities' ( Debentures) exceeding Rs 2,500 Interest other than 'interest on securities' exceeding Rs 5,000 Payment under contracts value exceeding Rs 20,000 or Cumulative Payment exceeding Rs 50,000 Payment under subcontracts value exceeding Rs 20,000 or Cumulative Payment exceeding Rs 50,000 Payment for Advertisement Contracts exceeding Rs 20,000 or Cumulative Payment exceeding Rs 100,000

193

194 A

10.300%

11.330%

20.600%

22.660%

194 C

2.060%

2.266%

2.060%

2.266%

194 C

1.030%

1.133%

1.030%

1.133%

194 C

1.030%

1.133%

1.030%

1.133%

TDS Rates
Payment for commission/ brokerage over Rs 2,500 Payment of Rent exceeding Rs. 120,000 lakh in the F.Y. for plant and equipment Payment of Rent exceeding Rs. 120,000 lakh in the F.Y. for other land & building Fees for Professional & Technical Services or Royalty (exceeding Rs 20,000 in the F.Y.) 194 D 10.300% 11.330% 10.300% 11.330% 194 I 10.300% 11.330% 10.300% 11.330%

194 I

15.450%

16.995%

20.600%

22.660%

194 J

10.300%

11.330%

10.300%

11.330%

TAX COMPLIANCE AND CORPORATE GOVERNENCE

Appropriate deduction of income tax TDS as per Income Tax Law. Payment of Tax on due dates. Return / statutory forms to be filed in the prescribed format on or before due date filling up 100% data qualitatively. PAN of all suppliers/ customers/service provider. Registration number and proper legal documentation /classification of services by the service provider and payment thereof by them to be satisfied before reimbursement. The duties and Taxes to be paid only on actual payment against original documents.

CERTIFICATE FOR DEDUCTION AT LOWER RATE

In case the total income of recipient justifies the deduction of income-tax at lower rates or nil deduction of income-tax, as the case may be, the Assessee can make an application accordingly to the assessing officer and obtain the certificate u/s. 197 of I. T. Act, 1961.

REVENUE TAX PLANING

Minimization of procurement cost By availing Cenvat Credit on Excise Duties/service tax paid on inputs. By availing VAT Credit Trade off between local purchase / CST purchase By identifying labour and material cost separately in work contract. Negotiation with non residents so as to make them bear the Income TDS liabilities for cost effectiveness and win-win solutions in line with provision of Double Taxation Avoidance Agreement (DTAA).

REVENUE TAX PLANING

Optimization of hidden cost on sale of petroleum product
System to be in place for collection of concessional forms like C form , F form and furnishing E-I or E-II form etc. as seller. 6(2)(b) sale i.e. transit CST sale Trade of between stock transfer / CST sale

THANK YOU