Offshore oil rigs to shell out duty for capital goods

new delhi: in a move that would have an impact on ongc and other oil exploration companies engaged in off-shore exploration, the government has brought the entire exclusive economic zone and continental shelf under the jurisdiction of the customs act of 1962. as a result, all off-shore installations would be treated to be part of the domestic tariff area, ruling out the possibility of classifying them as foreign territory. the modification means that exploration companies have to pay customs duty on the capital goods used at off-shore sites and this is bound to push up costs of crude production. since exploration at off-shore installations involves use of heavy equipment like rigs, the impact on costs would be significant. while most of the off-shore equipment is imported, the small portion of domestically-sourced equipment would also turn costs since the revenue department has decided that such suppliers are not eligible to claim export benefits. till now only ‘designated areas’ within the territorial waters were treated to be part of dta. the fate of the goods produced from other areas and supplied to the mainland were subject to dispute between the revenue department and ongc. same was the case with goods brought in from other countries to off-shore locations. exploration companies like ongc use heavy equipment at off-shore oil rigs and no customs duty was paid on them due to the dispute.