• Notification Date: 18-12-2024
• Notification No: N/A

Gas Stocks Dip as Reports Suggest No GST Inclusion for Natural Gas

Shares of gas companies like Indraprastha Gas, Mahanagar Gas, and GAIL (India) dropped by up to 3% on December 17, 2024 after reports significantly suggested that natural gas might not be included in the Goods and Services Tax (GST) agenda during the upcoming 55th GST Council meeting on December 21, 2024. This news sent shockwaves through the market as many had expected for the integration of natural gas under GST in order to streamline its reduction of costs and taxation.

Recently, natural gas faces multiple layers of taxation which include state VAT, central sales tax, and excise duties. This complex system leads to inefficiencies specifically as gas bought in one state and sold in another can attract high input taxes. For example, gas sold in Gujarat is taxed at 15% while CNG in Delhi enjoys no VAT, but states like Maharashtra, Gujarat, and Uttar Pradesh impose a VAT of 3-5%. Bringing gas under GST was seen as a solution to this inconsistency, potentially boosting its usage by making it more accessible and affordable.

Earlier this year, Petroleum Secretary Pankaj Jain highlighted that resolving the issue of taxation would help raise the use of natural gas, which is considered a cleaner alternative to other fuels. Although it becomes visible that the issue may not make it to the programme of the GST Council meeting this time.

The cautious approach of the government has left analysts and businesses hoping for future discussions as they believe that removing these barriers of tax could lead to a more systematic gas market and greater acquisition of natural gas across sectors. For now, the market will be closely watching the December 21 meeting for any updates or changes to this ongoing issue.