December GST meet to consider inclusion of natural gas

Mon Dec 02 09:23:32 UTC 2024: ## India Mulls GST Inclusion for Natural Gas, Windfall Tax Review

**Jaisalmer, Rajasthan –** The Indian government is considering a major tax overhaul, potentially bringing natural gas under the Goods and Services Tax (GST) regime. The proposal, put forward by the petroleum ministry, will be discussed at the upcoming GST Council meeting on December 21st in Jaisalmer.

The move aims to simplify the current complex tax structure, which involves multiple levies at both the central and state levels, leading to cascading taxes and hindering input tax credit benefits for businesses. Currently, VAT on natural gas varies significantly across states, ranging from 3% to 15%. The petroleum ministry believes GST inclusion would streamline the process and benefit the entire petrochemical value chain, from producers to end-users. Industry experts like Prashant Vasisht of ICRA predict lower operational costs and potential price reductions for consumers. However, states currently collecting significant VAT revenue from natural gas may resist the change.

Simultaneously, the finance ministry is reviewing the windfall tax on petroleum products. The review considers recent tax collections and the fluctuating crude oil prices. The tax, initially implemented to capitalize on high crude prices during the Russia-Ukraine conflict, has seen multiple revisions since its introduction. While it was raised as recently as July 16th, 2024, it has since been reduced to zero for domestically produced crude oil as prices have fallen. The possibility of the windfall tax being scrapped entirely is under consideration.

While the inclusion of natural gas in GST is expected to benefit companies like ONGC, Oil India, and Reliance, along with city gas distribution companies, the potential loss of state revenue presents a significant hurdle. Analysts suggest that carefully structuring the GST rate could mitigate revenue disruptions for both the Centre and the states. The final decision on both the GST inclusion of natural gas and the fate of the windfall tax rests with the GST Council.