In an unprecedented move, the petroleum and natural gas regulatory board has levied a 'turnover' tax on the revenues companies will earn from retailing CNG and natural gas in cities, a move that the industry sees as exceeding its jurisdiction.
PNGRB, the oil regulator, which as per its enacting legislation has powers to levy fee, has levied a minimum tax of Rs 2 crore per annum on turnover that companies like GAIL and Reliance Industries earn from selling CNG to automobiles and piped natural gas to households and industries.
As per the Gazette notification, PNGRB has asked entities to pay Rs 2 crore for turnover of up to Rs 20,000 crore (Rs 200 billion) under the head 'other charges'. For turnover of up to Rs 50,000 crore (Rs 500 billion) it has levied Rs 2 crore plus 0.008 per cent of revenues in excess of Rs 20,000 crore (Rs 200 billion). For turnover up to Rs 1,00,000 crore (Rs 1,000 billion)it will charge Rs 4.4 crore plus 0.005 per cent of revenues more than Rs 50,000 crore (Rs 500 billion).
Besides, 0.2 per cent of capital expenditure during construction period will be payable by entities, it said.
Petrofed, a body of oil and gas companies, has opposed the move saying "other charges are similar to levy of turnover tax or sharing of revenue which are not provided for under the PNGRB act."
A new tax can only be levied by the finance ministry and also PNGRB does not have powers to withdraw even a single penny collected in such charges, Petrofed said.
In a presentation to PNGRB, it said the board can levy 'other charges' only "against specific service rendered or goods supplied."
Besides the new tax, PNGRB has notified fee payable by companies for registration, authorisation and filing complaints.
Petrofed said "levy of other charges is not envisaged in the PNGRB act." The act envisages "government funding of PNGRB through the union budget and as such provides funds for the board, therefore levy of other charges is not justified," it said.
Drawing parallel with the central electricity regulatory commission, Petrofed said "the electricity act provides for reasonable fee structure for various activities and no charge as 'other charges' have been levied by the CERC."
"There being similarity in functions related to energy sector, PNGRB is requested to withdraw provisions related to 'other charges'," it added.
"Charges means demand an amount as a price for a service rendered or goods supplied. Thus 'other charges' provision do not conform to the meaning of 'charge' when related to money as no services are being rendered," Petrofed said.
