GS Paper - 3 (Economy)

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, an industry body that represents the likes of Reliance Industries as well state-owned firms.

What

  1. 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.
  2. 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 percent currently.
  3. Greater use of natural gas will cut fuel cost as well as bring down carbon emissions, helping the nation meet its COP-26 commitments.
  4. 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.
  5. 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.
  6. Inclusion of natural gas under GST is required to provide uniform taxation and to encourage free trade of it across the country without any tax anomalies. This is one of the key prerequisites for the development of gas exchange in the country.
  7. The industry body also sought lowering of import duty on LNG to make it competitive with polluting liquid fuel.
  8. Liquefied natural gas (LNG) is a clean fuel and mainly used in the fertilizer and power sector
  9. Natural gas is kept outside the ambit of GST (but) regasification of LNG is under GST ambit resulting in stranding of taxes, and a higher rate of tax owing to limited clarification is reducing the competitiveness of RLNG with other polluting fuels.