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Haldia Petrochemicals Resolves Long-standing Tax Dispute with Bengal Government

In a significant move, Haldia Petrochemicals Ltd (HPL) has chosen to settle a prolonged dispute over entry tax with the Bengal government through a dispute settlement scheme. The company has taken a proactive step by depositing Rs 81.16 crore, equivalent to two-thirds of the disputed tax amount, into the state exchequer. Furthermore, HPL has outlined its plan to settle the remaining dues by the conclusion of the current month.

The initiation of the resolution process occurred with HPL’s application for settling the disputed tax liability on August 29. This preceded a favorable final award from an arbitral tribunal, granting the company the right to receive Rs 3,285.47 crore from the Bengal government as an incentive.

HPL’s decision to resolve the entry tax liability involves the payment of 50% of the tax amount with an interest waiver. This falls under the settlement of dispute (SOD) scheme governed by The West Bengal Sales Tax (Settlement of Dispute) Act 1999, as amended by the West Bengal Finance Act, 2023. The issuance of the final discharge certificate is contingent upon the complete payment of Rs 121.75 crore by November 30.

The settlement of dispute scheme, initially introduced in 2018 and later modified in 2020, aims to streamline the resolution process for taxpayers, sparing them the complexities of prolonged litigation. Bengal Finance Minister Chandrima Bhattacharya, during her budget speech on February 15, disclosed that 28,697 cases had been resolved under the scheme, while approximately 25,000 cases remain pending before courts and tribunals.

To assist taxpayers further, the 2020 SOD scheme was extended. Following HPL’s engagement in dispute resolution with the government, the company recorded Rs 121.75 crore as an exceptional item in the statement of profit and loss for the quarter ending September 30. Notably, the entry tax, implemented by the state government in 2012, has faced multiple legal challenges.

HPL, alongside various other units in the state, had contested the levy. However, the recent developments indicate HPL’s inclination to reconcile with the state government, at least concerning this specific case.

Financially, HPL demonstrated a positive trajectory by narrowing its losses to Rs 179.9 crore in the second quarter of the fiscal year, a notable improvement from Rs 241.1 crore incurred during the same period in the previous fiscal year. The revenue from operations also witnessed a decrease, standing at Rs 3,067.4 crore compared to Rs 3,792.1 crore in the corresponding period a year ago. For the first half of FY24, HPL reported a loss of Rs 413.7 crore, slightly higher than the Rs 402.5 crore recorded in the first half of 2022-23.

This resolution not only marks a pivotal moment for HPL but also underscores the state government’s commitment to streamlining tax dispute resolution processes, fostering a business-friendly environment.

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