Top tips to avoid an indirect tax dispute
18 April 2012
Getting involved in an indirect tax dispute can prove costly for your business as Essar Energy found out earlier this year. Salman Shaheen looks at how you can avoid getting tangled up in tricky litigation and facing a similar fate.
Earlier this year Essar Energy reported a loss of $568 million for
2011 after a tax ruling went against the company. The Supreme Court
decision saw the company reverse a sales tax revenue benefit of $1
billion that had been previously recognised in the accounts. The net
effect on post-tax profit was $655 million, mainly because of a deferred
tax asset of $314 million, the company said.
Essar had agreed with the Gujarati tax authorities that it could
defer payment of sales tax on products from its new refinery in the
state until 2021. The company hoped to begin commercial production from
the facility in 2000.
However, production was put back until 2006, with Essar arguing that a
1998 cyclone and subsequent stay orders passed by the state high court
meant the delay was beyond its...
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