Oil minister Dharmendra Pradhan on Tuesday made a strong case for inclusion of natural gas in the goods and services tax (GST) regime, saying that if polluting coal can be included, then the environment-friendly fuel certainly deserves a place in the new regime.
“Coal has been included and levied with 5% tax but gas is outside GST, how fair is that,” he said at the KMPG Energy Summit in New Delhi. Crude oil, petrol, diesel, aviation turbine fuel (ATF) or jet fuel and natural gas are not included in GST, which has amalgamated over a dozen indirect taxes including excise duty, service tax and value added tax (VAT) since it kicked in from 1 July. Hence, while various goods and services procured by the oil and gas industry are subjected to GST, the sale and supply of oil, gas and petroleum products continue to attract earlier taxes like excise duty and VAT.
Unlike other industries which can take credit for any tax paid towards the furtherance of business, no credits on input GST will be available to the oil and gas industry leading to the huge additional indirect tax burden.
Pradhan’s ministry had previously written to the finance ministry to consider including natural gas in GST. Industry body Federation of Indian Chambers of Commerce and Industry (Ficci) has also pitched for the inclusion of natural gas in the new indirect tax regime so as to help producers contain cost and aid in moving towards a gas-based economy.
In a letter to finance minister Arun Jaitley, Ficci said that keeping natural gas out of the GST is causing hardships and having an adverse impact on the producers as it is increasing their costs. Gas sales including compressed natural gas (CNG) and piped gas supplies attract VAT ranging from 5-12%.