New Delhi: A total of 20 of India’s largest public sector undertakings (PSUs), including Maharatnas and Navratnas, are embroiled in tax disputes running into crores with the tax departments of the Central government and state government. According to a report by The Print, these tax disputes were worth around Rs 17,000 crores at the end of March 2019.
Who leads the list?
At the top of the list is state-owned Oil & Natural Gas Corporation (ONGC) with the highest amount of pending tax disputes with the Central government at Rs 7,658 crore — Rs 3,862 crore service tax dispute and Rs 3,796 crore GST dispute, both over royalty. These disputes are pending in various courts. Gas Authority of India Ltd (GAIL), another Maharatna, has the next highest tax dispute at Rs 2,889 crore over the levy of excise on naphtha manufactured by the company due to classification issues of the product.
The nature of disputes
The disputes mostly pertain to levy of service tax, goods and services tax (GST), income tax, or entry tax imposed by states and have dragged on for years in different courts and appellate bodies. The dues have been classified as contingent liability in most cases. Some firms have also paid part of the disputed tax amount ‘under protest,’ the balance sheets of these PSUs show.
The issue of royalty payments
The most recurring dispute has been over royalty payments made by these firms. The government is of the view that royalty is subject to service tax — a stand which the firms disagree with. The issue has continued even in the new GST regime, even as the firms have paid their dues under protest. Another recurring issue has been the classification of output and the levy of excise duty. Since petroleum products are still not under the GST regime, the Central government levies excise duty on them.