GST Council postpones decision on oil and gas contract taxation
The Goods and Services Tax (GST) Council has postponed its decision regarding the taxation of oil and gas exploration contracts. This information was disclosed during the 54th GST Council meeting, which took place today, under the leadership of Finance Minister Nirmala Sitharaman. The deferred decision pertains specifically to farm-in and farm-out agreements within these contracts.
Fitment Committee to review taxation issue
The GST Council has assigned the Fitment Committee with the responsibility of conducting an in-depth review of this taxation issue. The matter will be revisited at the Council's subsequent meeting, where a final decision is expected to be made. Previously, there were indications that the Fitment Committee was contemplating issuing a clarification on GST applicability for participating interests in these contracts.
Proposed classification and tax rate for subcontracting
The Fitment Committee suggested that subcontracting should be categorized as a supply of services, making it liable to GST. Furthermore, they proposed treating the transfer of a contract like an asset sale under Income Tax rules, with similar treatment under GST. The expected GST rate is 18% with the Input Tax Credit (ITC), based on the Fitment Committee's recommendation.
