Shares of city gas distribution company Indraprastha Gas (IGL) ended sharply higher by more than 5 percent on October 7 on anticipation of benefit from a lower rate of tax on sourcing of gas from Gujarat.
CNBC-Awaaz has reported that the tax implication on gas sourced from Gujarat will be lower effect October 1, attracting 2 percent Central Sales Tax (CST) instead of 15 percent VAT which was charged earlier.
An Equirus note has said that IGL is expected to be a key beneficiary from this development. According to some analysts, the change in tax implication is expected to improve IGL's EBITDA by 18-22 percent.
Shares of Gail India too ended near the day's high after the development while MGL ended 2 percent higher.
The state of Gujarat used to levy 15% VAT on all gas sold within the state - both APM as well as imported LNG. After October 1, ONGC has started to levy lower tax for inter-state sale of gas to CGDs, fertilizer companies and power plants. Previously, a higher rate of 15 percent was levied, which was non-refundable, if sold or used outside of Gujarat, which led to a higher delivered cost on gas sold to out-of-state buyers.
IGL had previously represented to the state government to reduce this tax implication and during the June quarter earnings call, KK Chatiwal, the managing director of the company had expressed hope of some progress on the issue in 3-4 months.
During Q1FY26, IGL posted a 6% on-year rise in overall volumes, driven by 6% growth in CNG and 10% growth in PNG segment. Adjusting for a one-time hit of Rs 114 crore in Q4FY25 pertaining to settlement with oil marketing
companies, the EBITDA per SCM for IGL had increased by 33% and stood at Rs 6.16 per SCM in Q1FY26.
The management had said in June that it expected further upside in EBITDA margin for IGL once the tariff rationalization took effect. "...the EBITDA margin should improve, and the long-term guidance has always been
Rs 7-8. So, we should be in that range. I think even some of the tax rationalization discussions are going on with some states. So, we are hopeful that we should be in the upper range of that going forward...," Chatiwal had said after the June quarter earnings call.
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