MUMBAI (Commodity Online):India's arrangement with Iran to use Indian Rupee as a trade currency is now on hold due to a tax issue. Earlier, Iran had agreed to accept Rupees as payments for 45% of its oil exports to India.
The problem arises when payments are made to the National Iranian Oil (NIO) company in India, since these will be viewed as income generated by the NIO in India and will hence be applicable for around 40% withholding tax.
The NIO wants the Indian refiners to take on the burden as the tax would eat into its profits. The Indian refiners on the other hand do not want to pay the tax by themselves as it will make oil much expensive.
The Indian oil ministry is reported to have asked the Finance ministry to waive the tax on oil payments made to Iran.
