NEW DELHI: The government should reduce the excise duty it levies on CNG till natural gas is included in the GST regime, Kirit Parikh Committee has recommended.
The panel, formed to recommend the fair price of gas to the end consumer and a “market-oriented, transparent and reliable pricing regime”, in its report to the petroleum ministry last week suggested, “gas should be brought under GST regime”.
Currently, natural gas is outside the ambit of GST or any other taxes -- central excise duty, state VAT and central sales tax -- applicable on the fuel. The government doesn’t levy excise duty on natural gas when sold in gaseous form but it charges a 14 per cent levy on compressed natural gas (CNG). States levy VAT as high as 24.5 per cent on gas.
“The panel recognise that this requires consensus among the states. To obtain this, if need be the states may be compensated for five years for any loss in revenue. The process of getting the needed consensus should be initiated now,” reads the report.
Natural gas along with crude oil, petrol, diesel and ATF were kept out of the GST regime when the single rate of taxation for goods and services was rolled out on July 1, 2017. However, gas-producing states such as Gujarat feared a loss of revenue if VAT and other taxes were to get subsumed into the GST.
“Till the time the GST regime is implemented, the government may consider moderating the central excise duty rate on CNG to reduce the burden of higher natural gas costs on consumers,” the report said. “The committee believes that this is the ideal long-term policy since all stakeholders’ interests are protected and since the impact on government finances is positive.”
The panel suggested ceiling and floor prices for a majority of domestically produced gas to help moderate rates of CNG. Bringing natural gas under the goods and services tax (GST) regime will help realise the government’s vision for a gas-based economy and raise the share of environment-friendly fuel in India’s energy basket.