Inclusion of natural gas under GST expected to be deliberated in Council meeting on December 21
Natural gas in India is currently outside the ambit of goods and services tax. Despite being constitutionally included under GST, the tax regime on natural gas remains fragmented, with excise duty levied by the central government and value-added tax (VAT) imposed by individual states. These taxes, between 11 per cent and 15 per cent, are not eligible for input tax credit (ITC).
The inclusion of natural gas under GST, expected to be deliberated in the GST Council’s meeting on December 21, could simplify this tax structure.
Uniform Tax Structure: Under GST, natural gas will transition from a dual-tax structure of excise and VAT to a unified rate across states. This simplifies compliance, reduces administrative costs and eliminates the cascading effect of taxes.
Eligibility for Input Tax Credit (ITC): Suppliers such as petroleum companies currently cannot claim ITC (GST) on their inputs since their ultimate output is not under GST. With GST inclusion, they will be able to offset these taxes, leading to lower production costs.
Competitiveness: By lowering input costs both at the manufacturer’s and consumer levels, industries will become more competitive domestically and internationally. This is particularly crucial for energy-intensive sectors.
