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GST calculations: L&T-Mcdermott, Sapoorji-Bhumi Armada consortiums may end up with massive liabilities
Apr 03: The correct calculation of GST in a tender submission has now become a big problem with bidders involved in complex E&P projects where multiple GST rates can be applicable, according to our sources.
8The calculations are complex. For example, onshore works contracts attract a different GST  while the GST rate is different for offshore works, at 18% within 12 nautical miles and beyond 12 nautical miles at 12%.
8Then again, goods are taxed at 5% and services at either 12% or 18%
8Bidders have to calculate the tax as on the date of the submission, with the owner, such as ONGC or OIL, unwilling to take any liability for miscalculating this rate. The GST is to be submitted to the government by the contractor and the owners will not take any responsibility.
8Any change of law will be taken into account prospectively not retrospectively.
The questions that arise are the following?
8Is it possible for E&P operators to provide for a level playing field to all bidders by comparing bids without taking GST into account?
8Did the Mcdermott-L&T consortium take a big risk by calculating a lower GST amount while bidding for the SPS+SURF contract in the KG-DWN-98/2 block. What if the tax authorities decide to charge a higher GST eventually? A higher GST calculation taken by the consortium of Technip UK Ltd and FMC Kongsberg Subsea AS for the same contract, as a result of which they lost the deal. What if their calculation is the correct one and not the one taken into consideration by Mcdermott-L&T.
8What about the bid submitted by the Sapoorji-Pallonji-Bhumi Armada combine for the high value FPSO contract in the same block? Are they making the same mistake? .
Click on Details for more on how GST calculations have become a nightmare for some bidders, so much so that contracts have been lost because of such miscalculations. 

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