Govt to exempt oil, gas exploration equipment from VAT

Jakarta (ANTARA News) - The government is drafting a regulation that will exempt the import of upstream oil and gas exploration equipment from value added tax, an official said.

Director General of Oil and Gas at the Energy and Mineral Resources Ministry Evita Legowo said on Wednesday the new rule would give certainty to oil and gas investors about the investment climate in the country.

"The new regulation will replace the government regulation on government-borne value added tax," she said.

She said she had asked the government to issue the new regulation as soon as possible.

Spokesman of the Upstream Oil and Gas Executive Body (BP Migas) Gde Pradnyana said the agency hailed the plan to issue the new regulation.

"Exploration activities entail high financial risks. So if (the import of upstream oil and gas exploration equipment) is exempted from tax this will be an incentive for investors to conduct exploration," he said.

But he asked what the status would be of value added tax that had been paid before the new regulation was issued.

"What is the status of value added tax on explorations that was paid from January 2011 until date the new regulation takes effect," he said.

If the government pushed through with the plan to scrap value added tax on the import of exploration equipment, the tax must not be collected from contractors, he said.

The tax would make investors reluctant to conduct exploration and thus it would have an impact on their oil and gas reserves, he said. (*)