European Fiscal Treaty - Where Things Stand

OCTOBER 10 - 2012

France inched closer to ratifying the European fiscal compact Tuesday after the lower house of parliament backed a bill incorporating the treaty into national law.

If the French Senate also support the bill, France will be the 14th country (and 10th eurozone member) to adopt the treaty, which was signed by 25 out of 27 EU leaders in March.

The countries who have already signed the treaty are: Austria, Cyprus, Denmark, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Portugal, Romania, Slovenia and Spain.

The treaty will enter into force on January 1, 2013, if at least 12 eurozone countries have ratified it.

Its main elements, which are legal point of view only for eurozone members, are:

Countries must incorporate a "golden rule" on balanced budgets into their legal systems, at constitutional level or equivalent, including automatic correction mechanisms - such as spending cuts or tax hikes - when the target is not met.

Structural deficits - that is, budget shortfalls not linked to the temporary effects of economic recessions - must be kept below 0.5 per cent of gross domestic product (GDP). Derogations apply "only in exceptional circumstances."

Countries whose public debt breaches the EU limit of 60 per cent of GDP must reduce it by 5 per cent per year. Conversely, countries respecting the limit can run higher structural deficits, up to 1 per cent of GDP.

Countries with deficits above 3 per cent of GDP are to face sanctions unless a qualified majority of eurozone member states blocks the move.

The European Court of Justice will police whether nations implement the budget rule properly and can fine them up to 0.1 per cent of GDP if they fail to do so.

Only countries that have signed the treaty will be eligible to apply for funds from the European Stability Mechanism, the eurozone's new permanent bailout fund.

Parliament members support permanent cuts treaty

  France's lower house of parliament overwhelmingly ratified the European Union fiscal pact today despite fears that it amounts to a "permanent austerity treaty."

  Parliament members backed the Fiscal Stability Treaty, which forces national governments to set budgets the EU deems balanced and penalises those which are considered to spend too much, by 477 votes to 70.
  The Left Front led resistance to the treaty, while around 20 MPs of President Francois Hollande's governing Socialist Party and his Green allies also voted against.
It passes to the Senate tomorrow.
  The CGT trade union federation led a day of protest to coincide with the vote, highlighting job losses and a flatlining economy. Marches "in defence of work and industry" were joined by thousands in Paris, Marseille, Lyon and other cities. 
  CGT secretary Bernard Thibault said Mr Hollande's government was proving no better than that of his predecessor Nicolas Sarkozy.
  "We're deep in crisis because of bad policy, quite simply," he said. "If a majority voted for a change of president it was because they wanted a change of economic and social policy."
  The president is seeking to convince unions to agree to reduced employment rights and wage cuts in line with business lobbying, but Mr Thibault argued: "I don't see why the workers should have to give more. It's workers who made possible the change in government, not business".
"This is about having a government that listens to its electorate."
  Fellow union official Pascal Debay said: "We're witnessing the breaking of employment and the wreckage
of French industry. That's why we're mobilising."
  Demonstrators outside the Paris motor show protesting at job losses in car manufacturing clashed with riot police, who fired tear gas at activists who pelted them with flour and eggs.
CGT also mounted strikes in the energy sector, reducing power output.
  nEurozone finance ministers meeting in Luxembourg failed to reach agreement on a tax on financial transactions or terms for increased economic unity in the bloc.
  Eleven countries agreed on a financial tax in principle and may go ahead without the others, but the details of the tax have not been clarified.

Malta Shipping Review 2012-2013

With its location in the heart of the Mediterranean Sea, a centuries old maritime tradition and a respected and favourable regulatory and tax regime for shipping, it is no surprise that Malta has developed one of the world's largest ship registers in modern times, and in the face of stiff competition from other prominent maritime nations.
Vessel registration under the Malta flag and the operation of the Maltese ships is regulated by the Merchant Shipping Act, a law based in the main on United Kingdom legislation, subsequently revised and amended in 1986, 1988, 1990, 2000 and 2010. The main legislation is also supplemented by a comprehensive set of rules and regulations. Malta is additionally a party to most of the major International Maritime Conventions and Malta-flagged ships are obliged to strictly adhere to the provisions of these international conventions. By the end of 2011, a total of 5,830 ships were registered under the Maltese Merchant Shipping Act, for a total of 46.6m tonnes. There were also 300 super yachts registered in Malta at the end of 2011, representing 19% growth over 2010.
In January, 2006, Malta was one of only four flag states that attained the highest quality ranking following the Paris Memorandum on Port State Control's annual inspections. The Paris MoU “White List” represents quality flags with a consistently low detention record. By the end of 2011, the White List included 43 flag states.
In order to register a ship in Malta, it must be owned by a company incorporated in the jurisdiction. All types of vessels from pleasure craft to oil rigs may be registered provided that they are wholly-owned by legally constituted corporate bodies, or by European Union citizens. There are no nationality requirements for shareholders or directors of Maltese companies, and neither are there any nationality restrictions on officers and crew employed on Maltese-flagged ships.
A yacht is first registered provisionally under the Malta flag for six months (extensible under certain circumstances) during which period all documentation needs to be finalized. This includes, in particular, evidence of ownership and of cancellation of former registry. Authority to operate still remains linked to conformity with the relative manning, safety and pollution prevention international standards. Once a vessel is provisionally registered, registration, transfer and discharge of mortgages may be effected immediately on presentation of the relative documents to the Registrar. The 1986, 1988, 1990 and 2000 amendments introduced important safeguards in respect of registered mortgages, making financing of Maltese ships more attractive.
Generally, boats that are more than 25 years old are not accepted for registration by the Maltese Registry, and ships which are older than 20 years will be required to undergo a Flag State inspection prior to provisional registration. Maltese law provides for both bareboat charter registration of foreign ships under the Malta flag and also for the bareboat charter registration of Maltese ships under a foreign flag. Ships that are bareboat charter-registered in Malta enjoy the same legal privileges, and have the same legal obligations, as any other ship registered in Malta. Maltese law also allows for the registration of ships that are under construction.
Yachts which do not carry cargo or more than 12 passengers may be registered as commercial yachts under Malta's Commercial Yacht Code 2006, which sets out standards on safety and pollution. The Commercial Yacht Code was developed in line with international regulations and other industry standards and caters for both small yachts and super-yachts above 24 metres and up to 3,000 gross tons. The Code has been proving successful with major yacht and super-yacht builders alike, with the number of commercial yachts certified in compliance with the Malta Code increasing considerably during the past years. The registration procedure for yachts is similar to that of other vessels, and a six month provisional registration is usually granted allowing time for the appropriate documents to be submitted and the registration finalized.
Malta applies a tonnage tax system to boats on its register. This varies from EUR1,000 for ships not exceeding 2,500 net tons, up to EUR7,180 for vessels exceeding 50,000 net tons (plus 5 cents for every net ton above this threshold). However, the amount of tax due can be lower or higher depending on the age of the ship: there is a 30% reduction in annual tonnage tax for ships which are less than 5 years old; and a 15% reduction for ships which are not less than five years old and not more than 10 years old. Vessels which are no less than 15 years old and no more than 20 years old pay an additional 5% in tonnage tax, rising to 50% for ships which are equal to or exceed 30 years of age. Commercial yachts pay an annual tonnage tax of EUR175 provided they are less than 24 metres in length. Commercial yachts of 24 metres or more in length pay tonnage tax on the same schedule as other ships.
Unusually for a low tax jurisdiction, Malta has entered into more than 50 double tax treaties, and a reciprocal agreement between Malta and the United States exempts shipping and air operations from income tax. This agreement makes it possible for Maltese companies owning or operating ships calling at US ports to claim an exemption from the 4% gross transportation tax levied on transportation income attributable to transport which begins or ends in the United States. Malta has also concluded two maritime agreements with the People's Republic of China and the Russian Federation; similar treaties with several other countries are in the process of negotiation.
In June 2012, it seemed that Malta’s position as the EU’s maritime jurisdiction of choice was further endorsed when reports emerged from Germany that the operator of the German cruise liner the MS Deutschland - the last cruise liner to operate under the German flag - had decided to re-flag the vessel in Malta. This was partly due to the German government’s refusal to offer concessions that, according to the cruise line, “offset the significant cost disadvantages” of operating under the German flag. However, it was said that, with the move to Malta, Deilmann is seeking a more predictable operational environment with the same advantages enjoyed by competitors. It has been estimated that the decision may cut the liner's costs by more than EUR250,000 (USD315,000), as flagging under the Maltese register will provide Deilmann with a number of tax exemptions, including on profits, and competitive annual fees. Malta also provides additional benefits such as eased administrative procedures.
However, in July 2012, the European Commission opened an in-depth investigation to examine whether the Maltese tonnage tax scheme is compatible with EU state aid rules. The Commission has concerns that the favourable tax treatment allowed by the EU Guidelines on state aid to maritime transport for the transport of passengers and freight by sea may have been extended to other categories of beneficiaries that are not suffering from the same handicaps and are therefore not entitled to lower taxes. The Guidelines on state aid to sea transport allow member states to reduce taxes for maritime transport of passengers or freight under certain conditions. However, according to the Commission, the scope of the Maltese tonnage tax may be too wide as it includes fishing boats, yachts, oil rigs and ship-owners without any shipping activity of their own.
“Given the multitude of exemptions and reductions available, it appears that in a number of cases the level of tax burden for a given tonnage is lower in Malta than in other Member States,” the Commission stated at the time. “This could potentially make the Maltese tonnage tax system more attractive than the ones applied in the rest of the EU. Moreover, no sufficient safeguards are established to ensure that benefits available under the tonnage tax do not spill over to non-shipping activities of the beneficiaries. The Commission therefore has concerns that the Maltese scheme may lead to distortions of competition in the EU internal market by potentially attracting companies and vessels from other Member States. The Commission will now investigate in-depth to find out whether these concerns are confirmed or not.
Joaquín Almunia, Commission Vice-President in charge of competition policy further explained that: "The Commission acknowledges the contribution of the maritime transport sector to the EU economy. Given the high exposure to competition from third countries offering favourable tax treatment to their shipping companies, the EU allowed the possibility to reduce taxes for maritime transport activities. In the Maltese case, the support measures apply to yachts, bankers, ship lessors, amongst other beneficiaries. This seems neither justified from a competition perspective, nor appropriate in times of high budgetary constraints."
On September 25, 2012, the Commission announced an invitation to submit comments on Malta’s tonnage tax regime and other state measures, but it remains to be seen whether the European Commission’s investigation will ultimately lead to changes in Malta’s tonnage tax regime. If the Commission decides to challenge aspects of the tax regime, it is possible that the Maltese government will contest them through the European Courts, a process which could extend to several years.

German Finance Minister intends to sign tax treaty with Singapore

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Germany's government is seeking to strengthen its tax treaty with Singapore to help it ensure German nationals aren't stashing assets in the Southeast Asian nation to evade taxes.
German Finance Minister Wolfgang Schaeuble will discuss revising Germany's bilateral tax treaty with Singapore during a visit to the Southeast Asian country Sunday as part of Berlin's efforts to step up its battle against tax evasion, a spokesman for the German finance ministry said Monday. A spokesman for Singapore's Ministry of Finance said the two countries are in talks to revise their 2006 double taxation agreement.
The move comes amid a broadening effort by authorities in the U.S. and Europe to penetrate the barriers of banking secrecy around the globe. Germany is concerned some of its citizens who once stashed their wealth in secret Swiss bank accounts have begun to move money to Singapore ahead of a new tax treaty with Switzerland that will make it harder for Germans to park their money in Swiss accounts out of the reach of the German tax authorities.
"The revision of the current bilateral tax treaty is part of our strategy to take a comprehensive global approach in fighting tax evasion," the German finance ministry spokesman said.
Mr. Schaeuble will meet with Prime Minister Lee Hsien Loong, among other Singapore officials during his visit.
"Singapore's policy of enhancing tax cooperation with its tax treaty partners is not a new one," the Singapore finance ministry's spokesman said. "Singapore is committed to the internationally agreed standard for exchange of information."
Since Singapore adopted the Organization for Economic Co-operation and Development guidelines on tax transparency in 2009, it has added them to bilateral tax agreements with 35 countries "and will continue to do so with others," the spokesman said.
As in Switzerland, Germany wants Singapore to become more transparent and make public information about German investors in Singapore to German tax authorities. In the new tax treaty with Switzerland, the Swiss government has agreed to withhold the tax due on German accounts in Swiss banks but doesn't provide the German government with the names of the investors. That way, Germany gets the taxes owed, but Switzerland still can ensure the secrecy of its bank accounts.
Abhijit Ghosh, a Singapore-based tax partner at PwC Services LLP, said much of the capital migration from Europe to Singapore is to try to take advantage of better investment returns. "It is definitely happening. Against the backdrop of the euro crisis, you do see a number of fund managers and bankers who are setting up shop in Singapore to tap into leverage on the Asian growth story here because of the erosion of the capital base in Europe," he said.
But that by itself is no reason for German authorities to be concerned, "unless they have reason to believe the flight of capital is meant to evade taxes," he said.
Singapore came under scrutiny in recent years as the U.S. and Europe began cracking down on offshore bank account holders, seeking more transparency from countries with a long tradition of banking secrecy like Switzerland. Singapore's bid to align itself with international standards helped it in November 2009 to get off an OECD "gray list" of countries targeted by the U.S., France, Germany and others over concerns that their tax laws hide tax evaders and money launderers.
When it adopted the OECD guidelines, Singapore said it wanted to emphasize "its role as a trusted centre for finance and a responsible jurisdiction, with strong and consistent regulatory policies and a firm commitment to the rule of law."

Eurozone contemplates separate budget, new FTT tax

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A kind of Soviet-style centralized economy could replace the current EU Treaty, creating a separate, unified "single budget" for the 17 countries sharing the euro.

As the EU summit draws near, the conceptual single-budget proposal, including a new transaction tax, is being widely acclaimed by northern European countries, including Britain, Denmark, the Netherlands and Finland, according to a Sunday Reuters report. "I wouldn't say that there was strong support for it, but there was certainly a feeling that this is an idea that should be explored in more detail," said one diplomat briefed on a recent discussion that took place between eurozone leaders. 

 

 The centralized, single budget proposal was first laid out by Herman Van Rompuy, the president of the European Council. In a document published in September, Rompuy proposed the single budget concept to stimulate debate about how Europe's monetary union could be strengthened. Van Rompuy’s idea involves creation of a "fully fledged fiscal union" among the 17 countries that share the euro under a single treasury office and "a central budget whose role and functions would need to be defined." While there is no definition of what would constitute a “single budget, or what the ramifications are to sovereignty and national commerce, Germany and France have both signaled their approval of the concept as an ultimate direction towards attaining greater eurozone solvency. New taxes are being proposed as a way to pay for the single budget.

 

Germany and France are already hyping a financial transactions tax (FTT) that would be implemented among nine euro zone nations, which is considered the minimum required to gain quarry. "There will come a time when you need to have two European budgets, one for the single currency, because they are going to have to support each other more, and perhaps a wider budget for everybody else," British Prime Minister David Cameron told the BBC on Sunday, the first day of his Conservative Party's annual conference. "I don't think we will achieve that this time, but it is an indicator of the way that Europe is going," he said. Some officials have reportedly implied that it could involve each country setting aside 0.3 or 0.5 percent of their GDP for a communal budget while others disagree.

 

"The modalities are completely unknown," said one EU official when asked how a single budget might work, according to the report. Even if FTT and the single budget proposal are discussed rigorously at the October 18-19 summit, it would likely take years to implement either, even if everyone supports it. The proposal would mean making fundamental changes in how the eurozone is administered and even changing the EU treaty, which is indicative of an extended and divisive debate.

Italy and Gibraltar Sign tax information exchange agreement

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The government of Gibraltar has announced the signing, on October 2, 2012, with Italy, of the territory's 20th tax information exchange agreement (TIEA).

Gibraltar’s Minister for Financial Services, Gilbert Licudi, signed the agreement at the Italian Embassy in London, with the Italian Ambassador to the United Kingdom, Alain Giorgio Maria Economides, signing on behalf of the Italian government.

Licudi said that he was “particularly pleased" to have signed this TIEA with Italy. "This agreement brings the total of such agreements signed to 21, with 18 of those having already entered into force. It also underscores the government’s commitment to international standards of cooperation.”

He added that he trusted the agreement would encourage the development of a closer business relationship with Italy. Licudi was accompanied to the signing by James Tipping, Gibraltar’s Finance Centre Director.
It was disclosed that, to date, Italy has signed 97 double taxation agreements including provision for the exchange of tax information, and four TIEAs (the last being with Guernsey on September 5 this year).

Germany is thinking to sign a tax deal with Singapore

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During an upcoming visit to Asia, German Finance Minister Wolfgang Schäuble intends to negotiate a bilateral agreement with Singapore pertaining to the exchange of tax information between the two countries, according to the German finance ministry.
Plans to update and to revise the existing double taxation agreement (DTA) with Singapore, by aligning provisions with the latest international developments and Organization for Economic Cooperation and Development standards, form an important part of global action against tax evasion, the German ministry explains, highlighting the fact that the main aim is to improve information exchange in tax matters.
The ministry underlined its optimism regarding the chances of negotiating a new accord, emphasizing Singapore’s declared “white money strategy”.
Schäuble’s Singapore plans are to be seen within the context of the negotiated German-Swiss tax treaty, due to enter into force on January 1, 2013. Reports suggest that banks in the Confederation have urgently advised their German clients to swiftly transfer their untaxed assets to Singapore, thereby escaping the clutches of the German tax authorities when the provisions apply. Swiss banks have vehemently denied the allegations, however.
The tax agreement with Switzerland provides notably for the taxation of the hitherto undeclared and untaxed assets of German residents held in Swiss accounts as well as for the equal tax treatment of future income from the capital deposits of German taxpayers at the same rates as levied in Germany.
Although Germany’s main opposition parties the Social Democrats and the Green Party have opposed the accord from the outset, threatening to veto the text in the Bundesrat, or upper house of parliament, where the black-yellow coalition no longer has a majority, Rhineland-Palatinate’s Prime Minister Kurt Beck recently indicated that further negotiations could avert a disaster. The vote in the Bundesrat has reportedly been postponed until the end of November to facilitate ongoing cross-party discussions.

Portuguese Budget Hikes Taxes

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Amid growing unrest, Portugal’s Finance Minister Vitor Gaspar unveiled details recently of a new wave of austerity measures, aimed at reducing the country’s deficit and appeasing its bail-out creditors.
Determined to ensure disbursement of the next tranche of international aid from Portugal’s bail-out agreement, Gaspar previewed the 2013 budget providing for fiscal measures totalling around EUR4.3bn (USD5.6bn).
Among the key measures to be included in the budget are plans to introduce a 4% extraordinary tax on income next year and to reduce from eight to five the number of income tax brackets.
Other proposed tax rises announced by the finance minister include plans to impose new levies on capital gains and to introduce a financial transactions tax. Precise details of these proposed measures have yet to be finalized.
The centre-right Portuguese government of Prime Minister Pedro Passos Coelho has, however, been forced to abandon its controversial plans to increase social security contributions paid by workers.
The government had planned to increase payroll social security contributions by almost two thirds, from 11% to 18%, and to reduce employer contributions from 25% currently to 18%.
Unsurprisingly, the proposals provoked immediate outrage from unions and from workers, accusing the government of simply transferring the fiscal burden from companies to individuals.
The u-turn marked a significant turning point, highlighting Portugal’s waning patience and increasing frustration with the austerity measures imposed by international lenders in return for the country’s EUR78bn bailout programme, agreed with the Troika last year.
Portugal has already pursued a rigorous fiscal policy, raising taxes, cutting wages and public spending.
The government aims to reduce the deficit from a forecast 5% of gross domestic product (GDP) this year to 4.5% in 2013, and to subsequently 2.5% of GDP in 2014, under the 3% limit.
Due to be examined by the Portuguese parliament on October 15, the budgetary measures have already gained approval from the European Commission.

Dunne dismisses tax haven suggestions

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Revenue Minister Peter Dunne is dismissing a suggestion New Zealand is a tax haven after criticism over his "legitimate tax avoidance" comments.
In an interview aired by 60 Minutes yesterday about foreign trusts, Mr Dunne said the term tax haven was an exaggeration because it implied illegal tax evasion rather than "legitimate tax avoidance".
"There's nothing sinister about that - minimising one's tax has always been within the law, that's the difference between avoidance and evasion," he said.
The comments sparked criticism, with Green Party co-leader Russel Norman labelling them "astounding".
"The tax system is being undermined by the minister in charge of it," he said.
Prime Minister John Key was today unconcerned by Mr Dunne's comments.
He had not seen the 60 Minutes interview but Mr Dunne would have been using "the absolutely correct technical terms", he said.
"Tax evasion is completely against the law. Tax avoidance means that it's a responsibility of your accountant to actually look to minimise your tax as best you can within the bounds of the law."

Mr Key said servicing foreign trusts in New Zealand was a strong and legitimate business that employed a lot of professionals and added to the New Zealand economy.
"It's a very sensible place to house a trust."
Mr Dunne today dismissed the idea that New Zealand was a tax haven for foreign trusts.
"The key identifying characteristics of tax havens are secrecy and lack of transparency. Those are simply not factors here in New Zealand. Our legislation for taxing trusts is fully transparent."
He also announced that New Zealand would sign a multilateral convention on tax assistance later this month.
The Convention on Mutual Administration Assistance in Tax Matters will give Inland Revenue the ability to request help from other tax authorities in detecting and preventing tax evasion, and collecting outstanding tax debts.
"This is an important step and consistent with New Zealand's approach to tax matters, and frankly, makes a mockery of tax haven assertions," Mr Dunne said.
New Zealand had a wide network of tax treaty partners, including 37 double tax agreements and a growing network of tax information exchange agreements.
Dr Norman has called for more transparency of the roughly 8000 foreign trusts in New Zealand, which are set up with foreign income by non-residents but managed in New Zealand.
The trusts must be registered with Inland Revenue, but are not required to pay tax and their ownership is effectively anonymous.
"New Zealand's foreign trusts hide billions of dollars of assets and should be broken open to help stop the global tax evasion industry," he said.
Labour's revenue spokesman David Clark said Mr Dunne was far too relaxed and hands-off about the wealthy paying their fair share.

Tax clarity for transactions

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 The Government has announced a series of committees to relook tax laws, GAAR, DTC and others to bolster investor confidence. This is also, perhaps, the time to build clarity on certain aspects of transactions to help the Indian entrepreneur raise more finances internationally. Currently, transactions for investments related to future performance are challenged on grounds of income tax and exchange control. The need is to balance the risks with rewards in a manner that is fair to all stakeholders navigating parameters such as income tax, foreign investment policy, SEBI laws, corporate laws and securities, which at times could create conflicts.

Swiss law firm’s fee taxable in India

For decades, benefits claimed by partnership firms through international tax treaties have been under litigation. The complexities of legislations, jurisdictions and variance in tax treatments have kept alive the controversy on the topic. Recently, the AAR dealt with one such issue in the case of Schellenberg Wittmer, a Switzerland-based partnership firm whose partners are Swiss residents. The firm engaged in law practice in Switzerland was appointed by an Indian company for representation in an adjudication proceeding in that country. The controversy was over whether the firm could be treated as a resident of Switzerland under the India-Switzerland tax treaty.

The AAR held that the definition of ‘person’ in the tax treaty includes a company, body of persons, or any other entity ‘which is taxable under the laws in force in either contracting state’. Section 2(31) of the Income Tax Act, 1961 confers the status of a ‘person’ on a partnership firm, but there is no corresponding definition in Swiss law. Also, the partnership firm is not a taxable entity in Switzerland. Even though the partners are residents, they cannot invoke the tax treaty as they are compensated by the firm and not the Indian company. Further, the source of income for rendering professional services is in India.

Accordingly, the firm will not be treated as a resident under the tax treaty, and cannot benefit from it. Therefore, the legal fees received will be taxable in India.

Tax relief for inter-State gas sale

Since the inception of VAT (local sales tax) and Central Sales Tax (CST) laws, the issue of whether a sale would qualify as intra-State (subject to VAT) or inter-State (subject to CST in the originating State) has been under intense litigation.

More so in the oil and gas sector, where it has surfaced time and again as oil and gas for different buyers is transported through a common pipeline. Hence, the destination State often tries to levy VAT on the transaction (as such oil and gas is appropriated to the buyer at the exit point) while the originating State demands CST.

The Allahabad High Court, in a recent writ petition filed by Reliance Industries Ltd, has tried to settle this ambiguity. RIL was shipping gas from Gadimoga in Andhra Pradesh to Auraiya in Uttar Pradesh. The company was depositing CST on the sale in AP, while UP demanded VAT by treating it as a local sale.

The Court held that according to contracts executed, the delivery point is Gadimoga. From the seller’s perspective, the sale concludes at Gadimoga as all the rights and liabilities (that is, title of natural gas) are transferred at the delivery point. Therefore, it is an inter-State sale subject to CST.

The Court further held that if the contention of revenue were to be accepted, then every buyer would be required to install his own pipeline to transmit such gas, which is practically not possible. Accordingly, the Court while allowing the writ petition also directed the UP authorities to refund the VAT collected by them.