Cairn India moves to HC on Rajasthan govt tax demand

Cairn India has approached the high court in Jaipur to challenge the state government’s demand for sales tax on the company’s crude oil produced in Rajasthan but shipped out of the state in a pipeline. The state government had demanded a 4% value-added tax (VAT), but the company, which recently announced the sale of a majority stake in the Indian arm to Vedanta Resources, has argued that tax is applicable only if its produce is sold within the state. “Cairn has filed petitions against the demand of the state sales tax department for paying a 4% VAT on the sale of Barmer crude,” a state government official, who did not want to be identified, said. Cairn India said it was premature to comment. “We offer no comments at this stage,” Cairn India’s director for corporate affairs & communication Manu Kapoor said.
Instead of VAT, Cairn pays a 2% central sales tax (CST) that is levied on inter-state sales. While VAT is collected by the state, CST is collected by the central government. According to the Rajasthan government, the actual point of sale for Barmer crude oil is Rajasthan. “Gujarat is only a delivery point for the crude, hence, Cairn must pay 4% VAT,” the state government official said. Cairn, however, considers that both delivery of oil and its sale take place in Gujarat. “As it is an inter-state transaction, we pay a 2% CST,” the company executive said.