KOLKATA (miningweekly.com) – India’s Petroleum and Natural Gas Ministry is making a renewed bid to get natural gas, petroleum and allied products included in goods and services tax (GST) in the national Budget to be placed by the Finance Ministry before Parliament on February 1.

When GST was introduced in July 2017, 17 federal and state taxes were merged, but crude oil, natural gas, petrol, diesel and aviation turbine fuel were kept out of the pan-India taxation regime, ostensibly because states were heavily dependent on local levies for revenues.

Currently, states levy value-added tax (VAT) on these products at between 3% and 20%.

In a document brought out by the Petroleum and Natural Gas Ministry, making a case for including these products in GST, it is stated that such a move will improve investor confidence and attract more investment in natural gas infrastructure and have a positive impact on health owing to the reduction in carbon emissions through greater use of natural gas.

“As natural gas was not under GST, there is no input tax credit available for user industries. Further, the downstream industries are not able to claim the benefit of tax credit of existing VAT paid on purchase of natural gas which is in fact available for alternate fuels and feedstocks that are currently under GST,” the Ministry document said.

“We believe that natural gas and petroleum products can be included in GST in the budget. Including natural gas in GST will be the biggest drive of not just consumption, but will also incentivize producers to spend more on finding and producing more gas and also offer an incentive for importers to bring in large imported volumes of liquefied natural gas,” Petroleum and Natural Gas Minister Dharmendra Pradhan said in a statement.

It has been pointed out that aviation turbine fuel, which is almost a third of airlines' costs, the latter have to pay different rates of VAT, depending on re-fuelling points at airports in different states and a uniform GST rate would bring down operational costs of airlines.

According to an official, while a policy direction for inclusion of these products in GST could be announced at the forthcoming national Budget, any final decision would need to come from the apex and autonomous GST Council headed by the Finance Minister and comprising the finance Ministers of all state governments.

The Petroleum and Natural Gas Ministry maintains that a uniform tax regime would be in line with the government’s stated policy of increasing to 15% the use of natural gas in meeting the country’s total energy demand, up from 6% at present.