Press Releases

[New Delhi, May 18, 2005]

Sales Tax demand of Rs. 4,962 crore set aside: GAIL's viewpoint upheld
(Sl. No. ND/CC/05/45)

In a landmark judgment, Gujarat Sales Tax Tribunal, Ahmedabad, has set aside Sales Tax Demand of Rs. 4,962 crore on GAIL. The order passed on the 16th of May 2005, has upheld the stand of GAIL that transportation of natural gas by GAIL from Gujarat to other states amounts to 'Stock Transfer' and not 'Inter State sale'.

The judgment pronounced in favour of GAIL and will sizably reduce the Contingent Liability of GAIL. The company protested the demand of Rs. 4962 crore raised by the Sales Tax Department of Gujarat State. The central issue was about the transmission of Natural Gas from Gujarat to other states, which Gujarat Sales Tax Department claimed it as inter state sale and assessed the tax provisionally and passed order u/s 41B. GAIL carries gas from Gujarat to other states under its ownership and transfers the ownership at the custody transfer point and claim it as Stock Transfer.

The dispute on the demand of sales tax by Gujarat Sales Tax Department pertained to the period 1994-95 to 2000-01. Initially, GAIL contested the case at Hon'ble Supreme Court. The Hon'ble Supreme Court transferred the case to the State Tribunal on the ground that the issue did not involve pure question of Law. The tribunal after verifying the process involved for transmission of gas, has set aside the demand of the Sales Tax Department and ordered to make regular assessment u/s 41, considering the transfer of gas from Gujarat to other states as Stock Transfer. GAIL carries almost 85 % of the gas from Gujarat to various states under its ownership.

About GAIL (India) Limited

GAIL, a natural gas major, is focused on all aspects of the gas value chain including Exploration and Production, Gas Marketing and Transmission, Gas Processing, LPG Production, Petrochemicals and telecom. The company has also extended its presence in power, LNG re-gasification, city gas distribution and E & P through Equity/JV participations. Under its globalization initiatives, GAIL has already taken equity participation in three retail gas companies in Egypt i.e Fayum Gas Company, NATGAS and Shell CNG, Egypt and acquired 10 per cent equity in China Gas Holdings in China. GAIL is pursuing business opportunities in countries like Egypt, China, Iran, Myanmar, Russia, Kazakastan, Bangladesh, Turkey, and Romania in the areas of exploration and production, gas transmission, CNG and city gas distribution, LNG and petrochemicals. GAIL is also playing a key role in the area of Cross Border Pipelines in bringing Pipeline gas into India. For the first time, GAIL is making a foray in Crude Oil Transmission, by pursuing an opportunity in establishing a Pipeline from Samsun to Ceyhan in Turkey. GAIL has set up a wholly- owned subsidiary company viz GAIL Global (Singapore) Pte Ltd in Singapore.