Government to levy service tax on energy companies

The government will levy a service tax on energy companies, including ONGC and Cairn India, from the current fiscal year (2016-17). The tax will generate about Rs 19.22 billion and will be levied on royalties paid by energy firms to the exchequer on the oil and gas produced by them. Companies currently pay 9.09 per cent of the price they realise from the oil and gas produced from onshore fields and 16.67 per cent on output from offshore areas. The Central Board of Excise and Customs has stated that the licence is granted by the government to a company to exploit a natural resource, and hence the company is liable to pay service tax.