'Cut Excise Duty on CNG till gas is included in GST'

NEW DELHI: The Centre should moderate the excise duty it levies on CNG till such time that the environment-friendly natural gas is included in the one-nation-one-tax GST regime, Kirit Parikh Committee has recommended.

Natural gas is currently outside the ambit of GST, and existing legacy taxes - central excise duty, state VAT and central sales tax - continue to be applicable on the fuel.

While the Centre does not levy excise duty on natural gas when sold in gaseous form, it charges a 14 per cent tax on compressed natural gas (CNG). States levy VAT as high as 24.5 per cent on gas.

The Parikh Committee, which was formed to recommend fair price of gas to the end consumer and a “market-oriented, transparent and reliable pricing regime”, in its report to the Oil Ministry last week suggested that “gas should be brought under the GST regime”.

“The committee recognises that this requires consensus among the states,” it said.

“To obtain this, if need be the states may be compensated for five years for any loss in revenue. The process of getting the needed consensus should be initiated now.” Natural gas along with crude oil, petrol, diesel and ATF were kept out of the GST regime when the single rate of taxation for goods and services was rolled out on July 1, 2017.

Gas-producing states, such as Gujarat, feared a loss of revenue if VAT and other taxes were to get subsumed into the GST.

“Till the time the GST regime is implemented, Government may consider moderating the Central Excise duty rate on CNG to reduce the burden of higher natural gas costs on the consumers,” the committee report said.