The Government Is Planning To Bring Natural Gas Under GST

The government is planning to bring natural gas under GST. 28 percent GST may be levied on CNG, the government may take a decision soon.

With the recovery in GST revenue collection following the disruptions caused by the second wave of the Covid pandemic.

The Center is likely to initiate talks with states to include petroleum products in the new GST purview.

Sources said, based on the suggestion of the Petroleum Ministry, the Center may take up the issue of bringing natural gas under GST with the GST Council before the entire oil and gas sector is brought under it.

The government is planning to bring natural gas under GST: The 45th meeting of the GST Council is to be held in Lucknow on September 17, 2021.

However, the council members will discuss several pending issues such as compensation to states, revision of GST rates on COVID essential commodities, inverted duty structure, early inclusion of gas in the new taxation net by the Center.

As the revenue situation remains tense due to the havoc of Covid-19, states are hesitant to consider bringing high revenue-generating petroleum products under the ambit of GST.

But GST collections have improved significantly this year, with the psycho-mark above Rs 1 lakh crore for most months of FY22.

The Center feels, adding that it is looking at tax reforms in the oil and gas sector as well as the inclusion of gas. is the right time. It will help in planning to develop a gas-based economy in the country.

The government is planning to bring natural gas under GST: The inclusion of gas will not be a challenge for the GST Council as it is largely an industrial product.

Where the transition to the new taxation will not be difficult. The revenue implication for the states is also less in case of this switchover.

An official source in the oil ministry said the states are in a much better position now, with the GST revenue exceeding Rs 1 lakh crore in the last few months.

The Center has also improved its liquidity position through additional borrowing schemes. This will make it easier to include petroleum products under GST in a phased manner.

The imposition of GST on natural gas will help state-run oil companies like ONGC, IOCL, BPCL, and HPCL avoid a tax burden of Rs 25,000 crore as they will get credit on taxes paid for inputs and services.

Tax credits are not transferable between two different taxation systems.

The Steering Committee for Advancing Local Value-Added and Exports (SCALE), headed by Mahindra MD and CEO Pawan Goenka, in its report to the commerce ministry.

Committee recommended the provision of input tax credit to make natural gas prices more competitive. fought for it too. This may happen after the inclusion of GST.

Sources said the council may consider a three-tier GST structure for gas, where residential piped natural gas (PNG) is taxed at a lower rate of 5 percent.

Commercial piped natural gas at an average rate of 18 percent, and car fuel CNG can be taxed at a maximum rate of 28 percent.

However, such a proposal is yet to be drafted and may be placed on the table after a consensus on the inclusion of gas under GST.

VAT of 5-12 percent is levied on the sale of gas including CNG and piped gas supply.