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The GST Council, at its December 21st meeting in Jaisalmer, Rajasthan, may consider fixing the date on applying GST on natural gas.
“A request has been made to the Finance Ministry,” a senior Government official told businessline. It is expected that this will be included in the agenda for the upcoming meeting of the Council. A provision in the 101st Constitution Amendment Act says the GST Council will recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
Natural gas, along with crude, petrol and diesel, is under GST. What is to be decided is the date from which GST is to be levied. Till this happens, these continue to be part of old taxation system i.e. Central Excise Duty and VAT/Sales Tax. Some of these products attract levies at ad valorem (percentage of value) and some at specific rate (fixed amount irrespective of base value).
Excise duty
As of now, natural gas attracts NIL central excise duty for gaseous and 14 per cent for compressed. However, VAT/Sales differ from States to States. It is 3 per cent in Maharashtra while 15 per cent in Gujarat. Similarly, while central excise duty on petrol and diesel are ₹19.90 and ₹15.80, respectively, rate of VAT/Sales tax varies from States to States ranging between 1 per cent and 35.2 per cent. Once dates are finalised for GST, prices of these products could come down.
The GST Council, in its 45th meeting held on September 17, 2021, had considered inclusion of petrol/diesel and other petroleum products under the GST regime but the matter was deferred till detailed deliberations on account of substantial repercussions on state and central exchequer were held. The issue has not been taken up by the Council as an agenda item for any further deliberation till date.
Key revenue source
A reason for not imposing GST on petroleum product is revenue consideration. Collection from petroleum products has been a major source of revenue for States and the Centre. Data from PPAC (Petroleum Planning and Analysis Cell) show during April-September period of the current fiscal, 28 States and 8 Union Territories together collected over ₹1.43 lakh crore from POL (petroleum, oils, and lubricants). The Centre got over ₹1.22 lakh crore through central excise duty on petroleum products. Because of such a high collection, the Centre and the States have not been able to evolve a consensus on this issue.
At the same time, there is the issue of rate. Under GST, maximum rate could be 50 per cent (28 per cent slab rate and 22 per cent compensation cess). Going by the principle of RNR (Revenue Neutral Rate), rates for petrol and diesel could be more than 50 per cent. However, there should not be problem for natural gas as the present rates (Centre and States/UT together) are below 50 per cent. This is the reason why there has been an effort to start GST on petroleum products with natural gas.
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