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The Central government should moderate the excise duty levied by it on CNG till natural gas is included in GST regime, recommended the Kirit Parikh committee.

The Parikh Committee was formed to recommend fair price of gas to the end consumer and a ‘market-oriented, transparent and reliable pricing regime.’

Natural gas currently isn't in the ambit of GST though central excise duty, state VAT and central sales tax continue to be applicable on the fuel.

Though natural gas when sold in  gaseous form doesn't attract excise duty from the central government but it charges 14 per cent tax on compressed natural gas (CNG). States levy VAT as high as 24.5 per cent on gas.

In its report to the Oil Ministry last week suggested that "gas should be brought under the GST regime".

"The committee recognise that this requires consensus among the states," it said.

"To obtain this, if need be the states may be compensated for five years for any loss in revenue. The process of getting the needed consensus should be initiated now," it added.

Natural gas along with crude oil, petrol, diesel and ATF were kept out of the GST regime when GST was rolled out on July 1, 2017.

Gas-producing states, such as Gujarat, feared a loss of revenue if VAT and other taxes were to get subsumed into the GST.

"Till the time the GST regime is implemented, Government may consider moderating the Central Excise duty rate on CNG to reduce the burden of higher natural gas costs on the consumers," the committee report said.

"The committee believes that this is the ideal long-term policy since all stakeholders' interests are protected and since the impact on Government finances is positive," it added.

The panel suggested ceiling and floor prices for a majority of domestically produced gas to help moderate rates of CNG.

The government is targeting raising the share of natural gas in the country's primary energy basket to 15 per cent by 2030, from 6.2 per cent currently.

Bringing natural gas under the Goods and Services Tax (GST) regime will help realise the government's vision for a gas-based economy and raise the share of environment-friendly fuel in India's energy basket. 

The usage of natural gas will cut fuel costs as well as bring down carbon emissions, helping the nation meet its COP-26 commitments.

Non-inclusion of natural gas under the GST regime is having an adverse impact on natural gas prices due to the stranding of taxes in the hands of gas producers/suppliers.

Presently, the industry pays GST on the procurement of plant machinery and services but is unable to get the input tax credit as the final product is not included under GST.

 

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