KOLKATA (miningweekly.com) – The Indian government has initiated moves to bring natural gas under the purview of the Goods and Service Tax (GST) offering succor to a large number of gas-based power plants stranded by high-priced fuel.
A Parliamentary committee on energy has batted in favour of including natural gas in the integrated pan-India GST structure. The committee notes that natural gas, as a clean energy source, should not be put at a disadvantage compared with other fuel, including coal, which is already under the integrated tax regime.
“Natural gas should be included in GST at it will rationalise various taxes imposed on it currently with a single rate and this will make the fuel cheaper and affordable,” the committee noted in its report.
Even the Petroleum and Natural Gas Ministry has come out supporting the inclusion of the fuel in GST. “Coal has been included in GST and levied a single tax rate of 5%, but natural gas is out of the unified tax regime. How fair is that?” Dharmendra Pradhan, Petroleum and Natural Gas Minister said in a statement.
While the government could put forward the proposal for inclusion of natural gas under GST, the final decision vested with the GST Council, the body comprising representatives of the federal and state governments and constitutionally empowered to make any changes to the GST structure.
Once included in GST, it would enable every producer and consumer along the chain to off-set the tax paid from the sale price of the final product using the fuel.
As things stood now, petroleum products like kerosene, naphtha, liquefied petroleum gas were under GST regime, but products like petrol, diesel, crude oil, natural gas, aviation turbine fuel were outside the unified tax structure.
The Petroleum and Natural Gas Ministry argued that putting natural gas under a single tax rate would provide relief to large number of gas-based power plants, which were currently idling unable to cope with high costs of imported natural gas and a shortage of domestic availability.
According to government data, about half of India’s 24.867 GW of aggregate gas-based power generation capacity was currently idle in the face of the high cost of fuel.
A GST rate on natural gas would help these power plants to lower their cost of fuel and also enable power producers to claim credit on tax paid on the fuel on their sale price.