The Ministry of Petroleum and Natural Gas has recommended to the Finance Ministry the inclusion of natural gas in the Goods and Services Tax (GST) framework, an official with knowledge of the matter said on Thursday.
However, it has not yet been decided whether it will be part of the agenda of the next GST Council meeting to be held in December, the official said on condition of anonymity.
The Petroleum Ministry favors the inclusion of natural gas in GST as it will make taxation on the product more efficient, benefiting user industries like fertilizers and steel.
Since natural gas is currently taxed under central excise duty and state-level value added tax (VAT), businesses producing and using it are subject to two different taxation streams, as they are taxed under all other goods and services. GST has to be paid on services. are used in their operations. This complicates the tax regime and breaks the chain of input tax credits for businesses.
long standing demand
There has been a long standing demand from the industry as well as the Petroleum Ministry to include natural gas, crude oil, petrol, diesel and aviation turbine fuel (ATF) in GST. However, state governments will have to agree to the proposal to get the approval of the GST Council.
The Finance Ministry generally refers indirect tax recommendations other than customs duties to the Council, which consists of separate panels of central and state officials who assess legal and tax rate-related aspects. The political leadership takes decisions based on the proposals of these committees.
The inclusion of natural gas in GST could pave the way for the inclusion of four other items as it would lay the blueprint for this difficult-to-implement reform.
The GST Council is expected to meet in Jaisalmer on December 20 to discuss tax rate cuts on life and health insurance products and rationalization of the GST rate.
Email queries sent to the GST Council and the finance and petroleum ministries on Thursday seeking comments remained unanswered till the time this story was published.
