Petroleum Ministry Pushes for GST Inclusion of Natural Gas
The Petroleum and Natural Gas Ministry has proposed the inclusion of natural gas under the Goods and Services Tax (GST) framework, a move expected to simplify taxation for industries like fertilizers and steel. However, it remains undecided whether this proposal will feature on the GST Council’s agenda for its next meeting in Jaisalmer on December 20, 2024.
Key Points:
- Proposed Benefits:
Streamlined Taxation: Shift from the dual-tax system of central excise duty and state-level VAT to GST, reducing complexity.
Input Tax Credits: Businesses would gain seamless input tax credit, enhancing operational efficiency.
- Industry Demand:
The inclusion of natural gas, along with crude oil, petrol, diesel, and aviation turbine fuel (ATF), has been a long-standing demand from both the industry and the petroleum ministry. - Challenges:
State governments must agree to bring natural gas under GST, as they currently benefit from VAT revenues.
The proposal sets a precedent for the eventual inclusion of other petroleum products in GST, a politically sensitive issue.
- Next Steps:
The GST Council will assess the recommendation and consider its legal, tax-rate, and political implications.
The December meeting will also address GST rate cuts on life and health insurance products and tax rate rationalization.
What’s at Stake:
Incorporating natural gas into GST could mark the beginning of broader petroleum sector reforms, potentially benefiting industries reliant on natural gas while streamlining the overall tax framework
