GAIL wins Rs4,962-crore sales tax battle

New Delhi: In a landmark judgment, Gujarat sales tax tribunal, Ahmedabad, has set aside sales tax demand of Rs4,962 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 GAIL''s contingent liability. The company protested the demand of Rs4,962 crore raised by the sales tax department of Gujarat. 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 under section 41B. GAIL carries gas from Gujarat to other states under its ownership and transfers the ownership at the custody transfer point and claims 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 in the Supreme Court, which 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 under section 41, considering the transfer of gas from Gujarat to other states as stock transfer. GAIL carries almost 85 per cent of the gas from Gujarat to various states under its ownership.