The petroleum industry in the country has urged the government to bring natural gas under the ambit of Goods and Services Tax (GST) regime to realise the goal for a gas-based economy and raising its share in India's energy basket.
Natural gas is currently outside the ambit of GST, and existing taxes like central excise duty, state VAT and central sales tax continue to be applicable on the fuel.
In its pre-budget memorandum to the finance ministry, Federation of Indian Petroleum Industry (FIPI), also demanded rationalisation of GST on transportation of natural gas through pipeline as well as on re-gasification of imported LNG to help bring down cost of the environment friendly fuel.
Government 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 per cent currently. Greater use of natural gas will cut fuel cost as well as bring down carbon emissions, helping the nation meet its COP-26 commitments.
"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," FIPI said.
Value added tax or VAT on natural gas is very high in some states like Andhra Pradesh, which levies 24.5 per cent tax, Uttar Pradesh 14.5 per cent, Gujarat 15 per cent and Madhya Pradesh 14 per cent.
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," it said.