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• “If National Iranian Oil Company is to receive payments in India and in rupees, it will be liable to pay income tax as the money it receives would be treated as income,” said B Mukherjee, director (finance), HPCL. But neither NIOC nor Indian refiners want to pay the taxIndian refiners want exemption from payment of withholding tax to start using a newly agreed mechanism of paying in rupee for the crude oil they buy from the Persian Gulf nation of Iran, reports PTI.Iran had last month agreed to receive 45% of the over $12.6-billion payments it receives annually from India for exporting about 370,000 barrels per day of crude oil.“If National Iranian Oil Company (NIOC) is to receive payments in India and in Indian rupee, it will be liable to pay income tax as the money it receives would be treated as income,” said B Mukherjee, director (finance), Hindustan Petroleum Corporation (HPCL), India’s third largest Iranian oil importer.
• “The income tax levied is called withholding tax and is 40%,” he said.Neither NIOC nor Indian refiners want to pay the tax.“Mostly likely NIOC would not want to pay this high tax and wants HPCL to bear it. We clearly do not want to pay the tax as it will make our imports costlier. I might as well buy oil from somewhere else if this 40% stake is saddled on to me,” he added.Indian refiners are keen to make payments in rupee as they suspect the current payment route through Turkey may close due to US and European sanctions.
• Under the mechanism agreed last month, NIOC will accept 45% of the payments in an account opened in Kolkata-based UCO Bank. UCO Bank has been chosen because it has no US or European exposure and thus would not be impacted by sanctions.Iran is India’s second largest oil supplier accounting for 12% of its needs.Mr Mukherjee said Indian refiners currently pay Iran in euros through the Turkish bank, Turkiye Halk Bankasi.There are apprehensions that Turkey may be forced to stop this after the move by US and the European Union (EU) to ban any entity involved in Iranian oil and gas or petrochemical sectors.
• As part of the agreement, a part of the rupee payments will also be deposited in two Iranian private banks, Bank Parsian and Karafarin Bank. These are still not under sanctions that have been imposed on all state-run Iranian banks.Iran can use the money it receives to buy machinery, metal products, iron, steel, minerals, clothes, fibre, sugar, tea, wood and automobiles from India.Mr Mukherjee said refiners have not yet started paying in rupee because of the fear having to pay 40% withholding tax. A way out would be for New Delhi to exempt payments to Iran from taxes.
• Mr Mukherjee said HPCL which had in the fiscal year ending 31 March 2012 contracted 3.5 million tonnes of crude oil for imports from Iran on a term contract, has signed for import of only 3 million tonnes next fiscal.“The imports next fiscal will be at current year level...the term for 2011-12 was for 3 million tonnes plus an option of an additional 0.5 million tonnes,” he said.Mangalore Refinery and Petrochemicals (MRPL) is the India biggest buyer of Iranian oil at 7.1 million tonnes while Essar Oil buys 5.5 million tonnes. Indian Oi Corporation (IOC) has a term contract to buy 1.5 million tonnes while Bharat Petroleum Corporation (BPCL) could not commence its 1 million tonnes term imports from Iran this fiscal because it could not open an account with Turkey’s Halkbank for payment to NIOC.

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