The Union Budget would likely include a roadmap for inclusion of natural gas under the purview of Goods and Service Tax (GST), Kamal Kishore Chatiwal, managing director of Indraprastha Gas Limited (IGL) told Moneycontrol.
Natural gas currently attracts value added tax (VAT) from the state governments and an excise duty from the central government.
“We are expecting some announcement, at least a roadmap, for inclusion of natural gas under GST and rationalisation of excise duty on CNG (compressed natural gas),” said Chatiwal.
“There are a lot of differences, state-wise. Every state has a different VAT. So once natural gas comes under GST, we will have a uniform tax structure across the country. Several states including Gujarat have now agreed for including gas under GST,” he added.
Despite the long-standing demand of the oil and gas industry, petroleum products including petrol, diesel, natural gas and aviation turbine fuel (ATF) have not been included under GST, due to opposition from the state governments.
Minister of Petroleum and Natural Gas Hardeep Singh Puri on January 24 told reporters that natural gas would soon be brought under the ambit of GST as several states including Gujarat and Andhra Pradesh now see the benefit of such move.
The state governments in India levy VAT as high as 15 percent on natural gas. Gujarat imposes VAT of 15 percent on natural gas, while Rajasthan and Assam charges VAT of 10 percent and 14.5 percent, respectively.
The VAT charged on petroleum products is a major source of income for the state governments. In FY23, the total VAT collection from natural gas came in at Rs 23,000 crore, showed a Jeffries report.
Natural gas, pegged as a transition fuel, is majorly used by the fertilised sector, followed by the city gas distribution (CGD) and power sector.
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