Bhubaneswar, Dec 6 (PTI) The Odisha government and the Indian Oil Corporation Limited (IOCL) will soon file a joint petition in the Orissa High Court to inform it about the settlement of the dispute between the two over the Paradip refinery.

This was decided at the cabinet meeting chaired by Chief Minister Naveen Patnaik yesterday where the agreement to settle the tax dispute between the IOCL and the Odisha government on the Paradip Oil Refinery project was approved.

Briefing the media after the meeting Chief Secretary A P Padhi said "joint petition in consultation with the law department will be filed in the High Court of Orissa by the parties informing the court about the agreement."

Padhi said as per the settlement the Viability Gap Funding for the Paradeep Refinery Project will be revised to ₹ 700 crore per annum payable in four equal instalments in each quarter in the form of interest free loan for 15 years starting from 2016-17.

For the financial year 2016-17 and three quarters of 2017-18 the Odisha government will provide interest free loan to the IOCL by December 2017/January 2018 and every quarter thereafter, he said.

The repayment of amount by IOCL will start in the 16th year from each instalment. IOCL will deposit applicable VAT/GST as per law.

The VAT collected and not paid for 2015-16, 2016-17 and 2017-18 will be deposited by the IOCL immediately. The IOCL will deposit ₹ 2742.37 crore towards withholding of VAT for the tax period between December, 2015 to June, 2017.

The Odisha government shall waive interest of ₹ 224.33 crore up to August 31, 2017 calculated at the rate of one per cent per month on ₹ 2742.37 crore towards VAT withheld by the IOCL for tax period December 2015 to June 2017 and such other interest for the tax period of July up to the date of payment.

The penalty payable by the IOCL for the withheld payment for the above period would also be waived, he said.

The tax dispute began after the state finance department issued order on February 22,2017 to withdraw the fiscal incentive to the IOCL mentioned in MoU signed on February 16,2004 relating to interest free loan equivalent to sales tax payable to the state on sale of finished products of Paradeep Refinery for first eleven years from the commencement of the commercial production.

The IOCL filed writ petition in High Court challenging the state government order. The High Court ordered both parties to resolve their difference through working group chaired by secretary o the ministry of petroleum and natural gas. The working group which met on August 18, 2017 settled the fiscal dispute.

Viability Gap Funding conversion to interest-free loan; settlement mandates VAT/GST deposit and waiver of interest and penalty. A cabinet-approved settlement converts the project's Viability Gap Funding into an interest-free loan payable quarterly from 2016 17 with repayment deferred to the sixteenth year after each instalment; IOCL must deposit applicable VAT/GST and immediately remit withheld VAT for specified past periods, while the State waives interest up to a stated date and waives penalties for those withheld payments.