Clarity on GST rate key likely to determine benefits for gas users

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Gas utilities and city gas distribution (CGD) firms have done well over the last two days even as overall market sentiment has been weak. The optimism is driven by Prime Minister Narendra Modi’s statement that the government is looking to eliminate the cascading effect of different taxes on gas (across states) to reduce cost and increase usage.

Currently, the value added tax (VAT) in major gas centres like Delhi, Maharashtra, Gujarat, and Uttar Pradesh is nil, 13.5 percent, 15 percent, and 10 percent, respectively, for piped natural gas (PNG), while an additional excise of 14.42 percent is imposed on compressed natural gas (CNG).

Bringing natural gas under the goods and services tax (GST) may prove to be a double-edged sword, fear analysts. While it may help CGD firms to avail of input tax credit (ITC), it might also nudge them to raise CNG prices in cities like New Delhi. Nonetheless, increased gas usage would boost volumes.

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