NEW DELHI: The Central government is planning to persuade the GST Council to bring Compressed Natural Gas (CNG) under the ambit of the Goods and Services Tax (GST). If this happens, then it would be the first petroleum product under the GST regime.
“Finance Ministry is already considering including petroleum products under GST. However, it will be in a phased manner. In the first phase, it is likely to include CNG,” a senior Finance Ministry official told TNIE.
According to the official, the proposal is likely to be placed before the GST Council in its initial meeting.
On the long-pending request from the Ministry of Petroleum and Natural Gas to bring Aviation Turbine Fuel (ATF), petrol and diesel under GST, the official said this is unlikely to happen anytime soon.
“At this time, it is not feasible to place ATF or any other petroleum product (under GST). It (the plan) could be limited to CNG and industrial fuel,” the official explained.
All petroleum products in India are currently subject to multiple taxes — Central excise and state VAT — without the benefit of any input tax credit.
Consequently, the taxes on petroleum products such as industrial fuel and CNG, which are used as inputs in the production chain, do not get any tax credit.
This results in cascading effect of embedded taxes. To simplify this, the government is now planning to replace the current taxes with GST on industrial fuels and CNG.
“Natural gas is akin to petroleum products and derived from the same source. But unlike petroleum products, natural gas does not generate negative externalities. The general view, therefore, is that the tax regime for natural gas should be necessarily different from the one applicable to other petroleum products, and therefore, should be subjected only to GST, with the applicable benefits of input credit,” said Sumit Dutt Majumder, former chairman of Central Board of Excise and Customs.
When the government launched GST, it had decided to exclude five petroleum products, including crude oil, petrol, diesel, ATF and natural gas, from the list of items placed under GST, but included products such as cooking gas, kerosene and naphtha under the new regime.