Oil minister Dharmendra Pradhan on Thursday hoped that finance minister Nirmala Sitharaman will in her Budget set the tone for bringing jet fuel and natural gas under the GST regime to reduce the multiplicity of taxes and improve the business climate. “Our expectation is that in the coming Budget, ATF and natural gas is included in GST,” Pradhan said at a conference on natural gas organized by industry chamber Ficci here. On a day Delhi’s air quality put focus back on pollution in cities, Pradhan said bringing clean-burning natural gas under GST will be one of the biggest drivers of not just consumption but will also incentivize producers to spend more on finding and producing more gas as well as incentivize importers to bring in more LNG. In the same vein, Pradhan at another function later in the day rode in a hydrogen fuel-driven car developed by Toyota-Kirloskar.
Here too he asked industry to focus on finding alternative fuels and mobility solutions. Pradhan said the government is working to raise the share of gas in the country’s energy basket to 15% by 2030 from 6% at present with a view to reducing dependence on coal and liquid fuels. Pradhan’s words on GST will be music for the aviation and gas industries. Jet fuel makes up nearly half the cost of the airline operation. Lower and uniform tax rates across the country will thus reduce the operating cost for airlines. Gas companies will benefit as they will be able to claim GST paid on inputs for gas production or distribution etc. Pradhan has been making a case for the GST Council – the highest decision-making body of the indirect tax regime – to take a decision in favour of these two fuels at the earliest.
The Council is headed by Union Finance Minister and comprises representatives of all states and union territories. Under the existing structure, both natural gas and ATF attract the Centre’s excise duty and a state’s value-added tax (VAT). Both these and all other levies will get subsumed under GST if they are brought under its ambit. The decision on their inclusion depends on the financial position of states as revenues from these five petroleum products constitute a substantial chunk of state government finances. Barring a few, most of the states are incurring revenue shortfall as GST subsumed a dozen of their taxes, introducing the single levy, in a bid to simplify taxation system and remove the cascading effect of ‘tax on tax’ in the country.
According to the industry, keeping ATF and natural gas out of the GST net was increasing the cost of these products as a tax on inputs is not being credited against the sale of these products, which ultimately, adds to the cost of production. The aviation ministry has time and again sought inclusion of ATF under GST as any surge in international oil rates gets reflected in domestic jet fuel prices, leading to costlier air tickets. Natural gas is widely used as industrial input by a variety of industries from power to steel and it coming under GST would help eliminate the cascading impact of taxes, bringing down prices of CNG and piped natural gas.