NEW DELHI: More than four months after the launch of GST, the industry has pitched for 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 India’s Finance Minister Arun Jaitley, industry body Ficci has said that keeping natural gas out of the Goods and Services Tax is causing hardships and having adverse impact on the producers as it is increasing their costs. Currently, crude oil, petrol, diesel, jet fuel or aviation turbine fuel (ATF) and natural gas are not included in GST, which kicked in from July 1.
Hence, while various goods and services procured by the oil and gas industry are subject 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.
“This is the basic objective of GST which is to ensure that input taxes are not blocked in the system ie tax cascading is eliminated,” Ficci said in the letter. Currently, gas sales including CNG and piped gas supplies attract lower VAT, ranging from 5 per cent to 12 per cent and inclusion of natural gas in GST should not result in any large revenue loss, it said.
“This will be in keeping with the overall policy of the government to shift over to the cleaner fuels and increase the use of gas from present 5 per cent in the energy basket to at least 15 per cent by 2022,” the letter said.
A GST based taxation for the natural gas sector would help the domestic gas producers to contain costs and also help spread use of natural gas which is 40 per cent leaner than conventional fuels, it said. The chamber has requested the Centre and states to immediately consider covering natural gas under GST to avoid cascading effect and ensuring that the industries presently operating on natural gas do not get a “raw deal” under GST.
Until the introduction of GST on natural gas, the producers should get a refund of GST paid on all goods and services used in the exploration and production, it added.