FICCI’s Sanjaya Baru bats for 5 percent GST on natural gas, writes to Arun Jaitley

Federation of Indian Chambers of Commerce and Industry (FICCI) Secretary-General Sanjaya Baru has again called for an introduction of 5 percent Goods and Services Tax (GST) on natural gas, an item currently out of the new tax regime.

In a letter to Finance Minister Arun Jaitley, Baru said producers should get a tax refund for the expenses incurred during exploration and production of natural gas till the time the fuel comes under the GST net.

“It is recommended that natural gas producers (under their respective contracts) are allowed duty free imports and local purchases are done on deemed exports basis,” Baru said in the letter dated October 26, also written to Finance Secretary Hasmukh Adhia and Petroleum and Natural Gas Secretary K D Tripathi.

Besides natural gas, four more petroleum products — petrol, diesel, crude oil and air turbine fuel — are excluded from GST. These five items continue to attract sales tax and value added tax as per the old indirect taxation regime. There is a clamour emerging to bring petroleum products under GST, a decision that has to be taken by the GST Council, the highest decision-making panel on the tax rates.

Baru has called for natural gas being treated differently from petrol and diesel and being brought under GST at the Council’s next meeting.

The decision depends on the financial position of the states as revenue from these five petroleum products constitutes a major chunk of state government finances. States are hoping that the current losses in indirect tax collections — a result of several businesses still in the process of complying with the new regime — are a thing of the past soon.

According to the industry, the exclusion of petroleum products from GST is increasing the cost of these products as tax on inputs is not being credited against sale of these products.

“Keeping natural gas out of the ambit of GST is causing hardship and creating adverse impact on the natural gas producers as it is increasing their costs. Under the proposed GST regime, the finished manufactured products are subjected to levy of GST, but the natural gas used as industrial inputs is subjected to VAT, for which no input tax credit is available,” Baru wrote to argue his case.

He said this was defeating the basic objective of GST which was to ensure that input taxes were not blocked in the system and that tax cascading was eliminated. Baru pointed that moving to a natural gas-based economy was also a key agenda of Prime Minister Narendra Modi. The government aims to increase natural gas’ share in the country’s energy basket by two-and-a-half times to 15 percent by 2022.

Source : Money Control

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