The center can incorporate natural gas into the scope of GST
The Union government, which is planning a major political push to increase the share of natural gas in India’s energy mix from the current level of 6.2% to 15% by 2030, is considering a proposal to bring natural gas the area of Goods and Services Tax (GST): a measure that will make it cheaper for both industrial and domestic use, said two officials familiar with the matter.
Taxes on natural gas vary from state to state, reaching as high as 24%, a major deterrent to making it a popular fuel. The Ministry of Oil and Natural Gas (MoPNG) has proposed to include natural gas under GST to have a uniform tax rate across the country. The matter is under consideration, officials said, requesting anonymity.
The Secretary of Petroleum, Tarun Kapoor, confirmed the fact. “There is a demand from the industry [to impose GST on natural gas], which is also compatible with MoPNG. But then you have to go to the GST Council, ”he said, referring to the GST body made up of state and central representatives.
The two officials mentioned above said that gas transportation and the state-specific value added tax (VAT) on natural gas are two main components that make natural gas expensive. The gas, which is purchased at the cost of $ 1-1.5 million British metric thermal units (mmBtu) and has a landing cost of around $ 3 per unit, becomes $ 8 per unit for customers, they said.
Petroleum products such as crude oil, diesel, gasoline, natural gas, and aviation turbine fuel (ATF) are awaiting approval from the GST Council to be included in the GST network. Since these products are important sources of revenue for some states, they want your individual freedom to collect VAT based on their financial requirements.
DK Srivastava, senior policy advisor at consultancy EY India, said that all petroleum products should eventually come under the GST regime so that taxes on the inputs of these products can be neutralized.
“While other products can wait, natural gas can be brought into the GST regime without any significant loss of revenue to states and the central government, as it is currently taxed at relatively low levels, although rates differ between states. and between the Center and the states ”, he said. The central tax on natural gas is 14%, while VAT rates vary from 3% to 24% from state to state, the aforementioned officials said.
One of the officials said: “The matter has come up during recent pre-budget discussions and a proposal to have GST on natural gas could be presented to the GST Council after stakeholder consultations.”
The council is the main federal body for GST matters and is chaired by the Union finance minister. Its members are finance ministers of the states and territories of the Union. Council decisions are usually unanimous.
Speaking at an industry event on December 17, Petroleum Minister Dharmendra Pradhan said India was “ushering in a gas-based economy by increasing the share of natural gas” in its primary energy mix in in line with Prime Minister Narendra Modi’s vision of “one nation, one gas network.”
Prime Minister Modi will inaugurate the 450 km Kochi-Mangaluru natural gas pipeline on Tuesday that will eventually provide clean gas to industrial and domestic consumers in the districts of Kochi, Ernakulam, Thrissur, Palakkad, Malappuram, Kozhikode, Kannur, Kasaragod and Mangaluru officials said. .
“There is immense potential for PNG (natural gas piped) connections as there are 290 million liquefied petroleum gas (LPG) connections versus 7.5 million PNG connections. PNG is cheaper, cleaner and more convenient for consumers, hence an element of policy focus that requires a uniform GST rate for natural gas, ”said the second official.
Sunil Kumar, Chartered Accountant at Taxmann, the Editor on Tax Matters, said: “The non-inclusion of natural gas under the GST regime is negatively affecting gas producers, suppliers and industrial consumers as they face cascading tax problems o taxes on taxes and non-availability of credits in acquisitions ”.
Divakar Vijayasarathy, founder and managing partner of consulting firm DVS Advisors LLP, said that taxes on natural gas have a cascading effect and impact on both industrial and domestic consumption rates. “This would discourage the use of gas as an energy source … Natural gas extraction is very capital intensive and it would be essential to attract foreign investment in this sector. Therefore, the government should improve the ease of operation of this sector to achieve its goal of clean energy and development of the national gas network. “