Central States May Discuss Early Inclusion of Natural Gas in GST Fold, Auto News, ET Auto
New Delhi:With a rebound in GST revenue collection after the disruption caused by the second wave of the Covid pandemic, the Center is likely to start a dialogue with states for the inclusion of petroleum products in the new indirect tax fold. .
Sources familiar with the development said that based on the suggestion of the Petroleum Ministry, the Center could discuss with the GST Council the issue of introducing natural gas under the Goods and Services Tax regime. (TPS) before the entire oil and gas industry is submitted under.
The 45th GST Council meeting is scheduled for September 17, 2021 in Lucknow. While board members will discuss several outstanding issues such as state compensation, revised GST rates on essential elements of Covid, reverse duty structure, the Center is also likely to advocate for early inclusion of gas in the new tax fold.
With the income situation remaining tense due to the Covid-19 epidemic, states have been reluctant to consider bringing high-income petroleum products back under the fold of the GST. But with the substantial improvement in GST collections this year, remaining above the psychological mark of Rs 1 lakh crore during most of the fiscal 22 months, the Center believes that now is the time to do so. pressure for tax reforms in the oil and gas sector as well as the inclusion of gas. help plan the development of a gas-based economy in the country.
The inclusion of gas would not be a challenge for the GST Council as it is largely an industrial product for which a transition to the new taxation would not be difficult. The revenue implication for the States is also low in the case of this changeover.
“The states are in a fairly better position now with GST revenues exceeding the Rs 1 lakh crore mark in recent months and the Center has also improved its liquidity position through additional borrowing programs. This should facilitate the gradual inclusion of petroleum products under the GST for the board, ”said an official source at the Petroleum Ministry.
The levy of the GST on natural gas would help state oil companies such as ONGC, IOCL, BPCL and HPCL reduce their tax burden to the tune of Rs 25,000 crore, as they would get a credit on the taxes paid for them. inputs and services. Tax credits are not transferable between the two different tax systems.
The Steering Committee for the Promotion of Local Added Value and Exports (SCALE), chaired by Mahindra & Mahindra MD & CEO Pawan Goenka in its report to the Ministry of Commerce, also requested the granting of a tax credit on inputs for natural gas in order to make its prices more competitive. This could happen once it is included in the GST.
Sources said the Council could consider a three-tier GST structure for gas where domestic natural gas (PNG) is taxed at a lower rate of 5 percent, commercial natural gas could be taxed at a median rate of 18 percent, and the CNG car could be taxed at a maximum rate of 28 percent. However, such a proposal has not yet been drafted and could be put on the table once a consensus is reached on the inclusion of gas in the GST.
Gas sales, including supplies of CNG and piped gas, are subject to a VAT ranging from 5 to 12 percent.
As part of its efforts to reach consensus with states on launching the GST, the government decided to exclude five petroleum products – crude oil, gasoline, diesel, ATF and natural gas – from the list of items placed under GST, but included products such as cooking gas, kerosene and naphtha in the new regime.