In an unexpected turn of events, India’s leading oil and gas producer, Oil and Natural Gas Corporation, has recorded a loss of Rs 248 crore in the fourth quarter. This financial setback is primarily attributed to the provision of over Rs 12,100 crore made for a disputed tax liability. According to a statement released by the company, ONGC’s net profit for the January-March quarter stood at Rs 247.70 crore, a significant decline from the net profit of Rs 8,859.54 crore reported during the same period last year.
The issue arose when the service tax department at various Oil and Natural Gas Company work centers demanded payment of service tax on the royalty paid by the company to the state and central government for the extraction of crude oil and natural gas from beneath the ground. Challenging these demands in court, ONGC found itself entangled in a legal battle. However, as a precautionary measure, the company decided to deposit the disputed service tax and Goods and Services Tax (GST) on royalty, along with interest, totaling Rs 11,558 crore by March 31, 2023. This amount has been deposited under protest while awaiting a final resolution on the matter.
The notes to the accounts also revealed that ONGC has disclosed an additional provision of Rs 1,862 crore for penalties and other differences related to the tax demands as a contingent liability. The company remains cautious and has accounted for these potential expenses while awaiting a final decision from the courts.
The unexpected loss incurred by ONGC during the fourth quarter highlights the challenges faced by the company in navigating tax regulations and disputed liabilities. Despite this setback, ONGC remains a prominent player in India’s energy sector, known for its significant contributions to the country’s oil and gas production.
ONGC’s performance in recent years has been commendable, with its ability to consistently generate profits and contribute to the nation’s energy security. However, the provision made for the disputed tax liability has temporarily impacted the company’s financial results for the fourth quarter. ONGC’s management and stakeholders will closely monitor the legal proceedings and seek a favorable resolution to safeguard the company’s financial interests.
ONGC’s extensive operations encompass exploration, production, and refining of oil and gas resources. The company plays a crucial role in meeting India’s energy demands, ensuring a reliable supply of petroleum products across the nation. Additionally, ONGC actively participates in various upstream and downstream projects, both domestically and internationally, contributing to the growth and development of the energy sector.
As ONGC navigates the legal complexities surrounding the disputed tax liability, the company will remain committed to its core objectives of sustainable growth, operational excellence, and responsible resource management. ONGC’s dedication to technological innovation and strategic partnerships will continue to drive its success in the ever-evolving energy landscape.
The issue arose when the service tax department at various ONGC work centers demanded payment of service tax on the royalty paid by the company to the state and central government for the extraction of crude oil and natural gas from beneath the ground. In response, ONGC challenged these demands in court, initiating a legal battle. However, as a precautionary measure, the company decided to deposit the disputed service tax and Goods and Services Tax (GST) on royalty, along with interest, totaling Rs 11,558 crore by March 31, 2023. This amount has been deposited under protest while awaiting a final resolution on the matter.
The company’s notes to the accounts also disclosed an additional provision of Rs 1,862 crore for penalties and other differences related to the tax demands as a contingent liability. ONGC remains cautious and has accounted for these potential expenses while awaiting a final decision from the courts.
Despite the recent financial setback, ONGC’s long-standing reputation and vast expertise in the oil and gas industry position it well to overcome challenges and emerge stronger in the future. The company’s commitment to ensuring energy security for the nation and its relentless pursuit of excellence will undoubtedly contribute to its continued success in the years ahead.
