Many analysts are of the view that the merger of Reliance Industries (RIL) and Reliance Petroleum (RPL) will have an impact on the state government’s revenue. Currently, RIL is paying to the state government huge amounts as taxes under VAT and other regimes. But after the merger, it is quite possible that the RIL unit at Jamnagar will be converted into an export-oriented unit.

“We don’t know whether the state government will actually lose revenue after the merger. That will depend on what the next step of the company is. As RPL is in an SEZ, the state government doesn’t get anything from it. After the merger, however, if the whole unit is converted into an export-oriented unit, we may lose all the revenue we get from RIL,” said state minister of finance, Saurabh Patel.

Tax consultant Monish Bhalla believes that to use the merger to save taxes, the company will have to change its sales pattern. “If the company focuses on exports and changes its sales pattern, it might be able to save a lot on taxes, and the state government would then lose the revenue it earns from it,” Bhalla said. Nitin Parikh believes that the company must have paid value added tax (VAT) to the state government on transfer of crude to RPL. “After the merger, RPL will become a separate division and so the transfer of crude will not attract VAT,” Parikh said.

Himansh Dhomse/ DNA-Daily News & Analysis Source: 3D Syndication