Bhubaneswar: Odisha is set to lose over Rs 2,000 crore in 2016-17 due to deferment of value added tax (VAT) to Indian Oil Corporation's Paradip oil refinery.
The loss to the exchequer will be 11.42 per cent of the commercial tax target of Rs 17,500 crore fixed by the state government for the 2016-17 financial year.
"It is apprehended that the total deferment of VAT, being availed by IOCL unilaterally in violation of the provisions of the OVAT Act, is likely to exceed Rs 2,000 crore in 2016-17," said Saswat Mishra, Commercial Tax Commissioner in a letter to Additional Chief Secretary (Finance).
"Such a huge loss cannot be compensated by any other means," said Mishra.
Against the target of Rs 17,500 crore from commercial tax, the state government has collected Rs 5,530.95 crore by August, 2016 at a growth rate of 4.02 per cent.
"The below par growth rate is mainly on account of deferment of Rs 531.96 crore availed by IOCL's Paradip refinery, which is 9.62 per cent of cumulative collection till August," said Mishra.
IOCL has commissioned the 15 million tonne crude oil refinery at Paradip at a cost of Rs 34,555 crore.
According to a pact signed by the Odisha government with IOCL, VAT deferment is for 11 years from the date of commercial operations of the refinery.
The tax concession was extended to IOCL considering its operational viability, local employment and the region's economic growth.
However, the state government has urged the Union Ministry of Petroleum and Natural Gas to reconsider the VAT deferment mentioned in the agreement.
The state government, in its argument, said that since the IOCL refinery was already delayed by over three years, the tax concession seemed unjustifiable.
Besides, the refinery capacity was expanded to 15 mtpa compared to nine mtpa envisaged originally.