Budget 2022: Industry urges the government to bring natural gas under GST

The government should bring natural gas under the Goods and Services Tax (GST) regime to realise Prime Minister’s vision for a gas-based economy and raising the share of the environment-friendly fuel in India’s energy basket, said a natural gas industry body, Federation of Indian Petroleum Industry (FIPI).

Natural gas is currently outside the ambit of GST, and existing legacy taxes — central excise duty, state VAT, central sales tax — continue to be applicable on the fuel.

In its pre-Budget memorandum to the finance ministry, Federation of Indian Petroleum Industry (FIPI), which boasts of members from across the oil and gas spectrum, also demanded rationalization of GST on transportation of natural gas through pipeline as well as on re-gasification of imported LNG to help bring down cost of the environment friendly fuel.

The Prime Minister has set a target of raising the share of natural gas in the country’s primary energy basket to 15 per cent by 2030, from 6.2 per cent currently. Greater use of natural gas will cut fuel cost as well as bring down carbon emissions, helping the nation meet its COP-26 commitments.

“Non-inclusion of natural gas under the GST regime is having adverse impact on natural gas prices due to stranding of taxes in the hands of gas producers/suppliers and is also impacting natural gas-based industries due to stranding of legacy taxes paid on it,” FIPI said.

VAT rate on natural gas is very high in some states — Andhra Pradesh levies 24.5 per cent tax, Uttar Pradesh 14.5 per cent, Gujarat 15 per cent and Madhya Pradesh 14 per cent.

FIPI said non-inclusion of basic petroleum products such as crude oil, natural gas, petrol, diesel and ATF under the newly introduced GST regime is affecting the sector adversely.

“Presently, industry is paying GST on procurement of plant machinery and services and is unable to get the input tax credit as the final product is not included under GST. This is leading to immense pressure on the industry, which, in turn, is straining the entire economy,” it said. The industry body also sought lowering of import duty on LNG to make it competitive with polluting liquid fuel.

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