Punjab slashes VAT on natural gas from 14.3 pc to 3.3 pc

The government of Punjab has decided to reduce the valued added tax (VAT) on natural gas in the gaseous state other than the compressed natural gas (CNG) from 14.3 per cent to 3.3 per cent.

The decision, which aims at encouraging industries to shift to eco-friendly gas, was taken at the meeting of Cabinet which was chaired by Chief Minister Captain Amarinder Singh.

"The move will help cut down on industrial pollution in the state," said Chief Minister Singh, as quoted in an official statement issued after the meeting.

The present rate of VAT on natural gas in Punjab is 13 per cent plus 10 per cent surcharge, which comes to 14.30 per cent.

The major consumer of gas here in Punjab is the National Fertilisers Limited (NFL), which uses the gas at its plants at Bathinda and Nangal. Besides, this gas is also consumed by selected industries and the transport sector in very small quantity.

"NFL is purchasing natural gas worth Rs 300 crore per month from Gujarat, on which CST of Rs 45 crore per month at the rate of 15 per cent is being paid to that state. If the VAT rate on natural gas is decreased, the suppliers may start billing of natural gas to NFL from Punjab, which can lead to increase in PVAT collection on natural gas", said an official spokesperson, explaining the rationale behind the Cabinet decision.

Before March 2015, the VAT rate on natural gas was 5.5 per cent plus 10 per cent surcharge which was 6.05 per cent. But from March 2015 onwards, the VAT rate on natural gas was increased from 6.05 per cent to 14.3 per cent.

The VAT collection on natural gas from the years 2014-15 to 2018-19 came down considerably from Rs 105.77 crore to Rs 5.67 crore, which had further shown a quick decline to Rs 1.84 crore till June 2019, during the financial year 2019-20.