In a significant decision aimed at encouraging industries to shift to eco-friendly gas, the Punjab Council of Ministers Tuesday decided to cut down VAT on natural gas, in gaseous state other than Compressed Natural Gas (CNG), from 14.3 per cet to 3.3 per cent.
Chairing the Cabinet meeting, CM Captain Amarinder Singh said the move would help cut down industrial pollution in the state.
At present, the rate of VAT on natural gas is 13 per cent + 10 per cent surcharge i.e. 14.30 per cent in Punjab. The major consumer is National Fertilisers Limited (NFL), which uses the gas at its plants at Bathinda and Nangal. Natural gas is also consumed in very small quantities by select industries and the transport sector.
Before March 2015, VAT rate on natural gas was 5.5 per cent + 10 per cent surcharge i.e. 6.05 per cent. From March 2015 onwards, VAT rate on natural gas was increased from 6.05 per cent to 14.3 per cent. Due to increase in VAT rate, NFL started interstate billing of natural gas, due to which VAT collection on natural gas decreased. The VAT collection on natural gas from 2014-15 to 2018-19 came down considerably — from Rs 105.77 crore to Rs 5.67 crore, which had further shown a steep decline to Rs 1.84 crore till June 2019 in the financial year 2019-20.
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. In case the VAT rate on natural gas is decreased, the natural gas supplier may start billing natural gas to NFL from Punjab, which can lead to increase in PVAT collection on natural gas, said an official spokesperson.