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In no mood to dole out tax sops in the forthcoming Budget, Revenue Secretary Hasmukh Adhia has told industry and financial consultants not to press with their demand for including natural gas and LNG as ‘declared goods’.
Declared good status would mean a flat tax rate of 5 per cent across all States. Five per cent is at the lower end of the Central sales tax/value added tax rates.
With the government’s focus shifting to use of natural gas as a preferred fuel, the industry has been demanding for adding natural gas and LNG to the ‘declared goods’ list.
A senior Finance Ministry official told BusinessLine that “the request has been turned down… this is a long-standing demand for providing ‘declared goods’ status to gas pipelines, liquefied natural gas. The industry is also seeking the same for aviation turbine fuel (or jet fuel). But at present the government does not want to complicate the tax structure, when it is looking at a uniform Goods and Services Tax (GST) regime.”
Tax rates vary Besides, States also need to come on board as fuels flow from one province to another and the tax rates vary from territory to territory.
For example, natural gas is subjected to value added tax of 15.5 per cent in Gujarat, 14.5 per cent in Andhra Pradesh, and 5 per cent in Tamil Nadu, thereby increasing the delivered price of natural gas to customers at unaffordable levels.
In the case of the fertiliser sector, which is dependent on gas as feedstock, a high level of sales tax increases the extent of subsidy from the government.
This is also the case with jet fuel, which is the key component in the operations; it has been of major concern to the aviation industry.
“The government’s reluctance emerges from the ongoing thrust to promote GST and in the interim not to materially change the rules of the game which can disturb the finances of State governments.
“The industry will have to live with the status quo in this period. Fortunately, energy prices are currently ruling low,” said Gokul Chaudhri, Leader, Direct Tax, BMR & Associates LLP.
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