it is so crucial to impose 5% GST on natural gas to reduce fertilizer subsidies. Bringing natural gas under GST could put an end to the current differential taxation regime, as well as differing urea costs and subsidy payments across states. It will eliminate the tax-on-tax cascading effect.
Finance Minister Nirmala Sitharaman has stated that the tax rate for five petroleum goods – crude oil, natural gas, gasoline, diesel, and aviation turbine fuel (ATF) – can be set under the Goods and Services Tax (GST) as soon as the states agree at a GST Council meeting. GST is a “single tax” that is applied throughout India, with a set-off provision for tax paid on inputs.
The Constitutional Amendment Act, 2016 on GST while providing for the inclusion of petroleum products under its ambit, had kept them ‘zero-rated’. These items are still subject to central excise duty and state-level value-added tax (VAT) When will the ‘zero-rated’ label be removed? The GST Council has the authority to make decisions under the Act. Natural gas rate setting under GST – a major input used in the manufacture of fertilizers – has been on the Council’s agenda since the tax regime was implemented on July 1, 2017, but a decision has been postponed. Will the Council address FM assurance again at its next meeting?