"Revoke notification on input tax credit withdrawal on gas in Gujarat"

Assocham says cost of RLNG has shot up to 15% for gas distributors based outside Gujarat

Last Updated : Jan 09 2017 | 4:21 PM IST

Assocham has urged the centre government to immediately get revoked the notification vis-a-vis withdrawal of input tax credit on inter-state sale/branch transfer of natural gas issued by Finance Department of Gujarat government on November 28, 2016.

“Consequent to this notification, cost of re-gasified liquefied natural gas (RLNG) supplied by Petronet LNG, a Gujarat-based public sector undertaking (PSU) to other PSU gas distributors like Gail India Limited, Indian Oil Corporation Limited (IOCL) has shot up from four per cent to 15 per cent,” highlighted Assocham in a communication addressed to Union Minister for Commerce and Industry, Nirmala Sitharaman and Finance Minister of Gujarat, Nitin Patel.

The letter added, “These PSUs have passed on the increase in tax to industry outside Gujarat, thus making RLNG costlier by 11 per cent with adverse impact ranging from Rs 2.50 to Rs three per standard cubic meter (scm).”

Considering that many industries are stuck with long-term supply agreements with PSU distributors of costly RLNG and, therefore, cannot switch over to cheaper alternate source of energy due to ‘take or pay’ clause in said agreements.

“This notification has thus made matters worse by making RLNG further costlier hitting industries outside Gujarat very hard. At a time when trade and industry are moving towards implementation of goods and services tax (GST), this withdrawal of input tax credit is unjust for industries outside Gujarat as it is making them highly uncompetitive,” highlighted the Assocham letter.