Kirit Parekh panel proposes to reduce excise duty on CNG till gas is covered under GST

According to the Kirit Parikh committee, the central government should reduce the excise duty on CNG till gas is covered under GST.

The Parikh Committee was established to work for a “market-oriented, transparent, and reliable pricing regime” and a fair price of gas to the final customer.

central excise duty, state VAT, and central sales tax are still applicable to natural gas. Means old tax regime is applicable. Still GST regime not made applicable to gas industry 

Although the central government does not impose excise taxes on natural gas supplied in gaseous form, it does so on compressed natural gas, which is subject to a 14% tax (CNG). States charge a VAT on gas that can reach 24.5%.

It was urged last week in its report to the Oil Ministry that “gas should be placed within the GST framework.”

The statement read, “The committee acknowledge that this requires consensus among the states.

The process of reaching the necessary agreement should start right away, it continued. “To get this, if need be, the states may be reimbursed for any revenue loss for five years.”

When the GST was implemented on July 1, 2017, natural gas was excluded from the GST regime along with crude oil, gasoline, diesel, and ATF.

States that produce gas, like Gujarat, worried about losing money if VAT and other taxes were absorbed into the GST.

To lessen the burden of rising natural gas expenses on consumers, the government may consider reducing the Central Excise duty rate on CNG till the GST system is in place, according to the committee report.

According to the committee, this is the best long-term strategy since it safeguards the interests of all parties involved and has a favourable effect on government finances.

To help lower the cost of CNG, the panel recommended ceiling and floor prices for the majority of domestically generated gas.

By 2030, the government wants to increase natural gas’s present 6.2% position in the primary energy mix of the nation to 15%.

Bringing natural gas under the Goods and Services Tax (GST) framework will assist realise the government’s aim for a gas-based economy and enhance the share of environment-friendly fuel in India’s energy basket.

Utilizing natural gas will reduce fuel costs and carbon emissions, assisting the country in upholding its COP-26 obligations.

Non-inclusion of natural gas under the GST regime is having an adverse influence 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 collect the input tax credit as the final product is not included under GST.

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