Natural gas likely to come under GST ambit  

Taxation of natural gas could now come under the ambit of the proposed Goods and Services Tax. The committee of state finance ministers will meet this week to decide on all contentious issues holding up GST rollout by April 2011. As the Supreme Court has ruled in the RIL-RNRL gas sharing issue, the ministers will be able to decide on gas pricing model freely for setting the tax format. At present, natural Gas attracts 12.5% value added tax.

State finance ministers would meet in the Capital on May 21, after a long gap of about three months. This meeting could settle other contentious issues such as what should be the minimum turnover of a business before it comes under the GST regime. Senior finance ministry officials told FE that the agenda for the meeting this week would also include, other than the threshold limit for GST, inclusion of alcohol and purchase tax and the adoption of a plan to set up a fourth list of taxable subjects under the Constitution.

“This time, there would be a decision on purchase tax, alcohol and natural gas. Most likely natural gas and purchase tax would be included,” said a senior official. The empowered committee in its draft GST paper was silent on the inclusion of natural gas.

Purchase tax—a tax on transfer of goods especially food grains—at present varies across states. For instance, food grain producing states like Haryana and Punjab levy a purchase tax as it is a significant source of revenue for them.

The alcohol lobby is working hard to get the product into the GST list but as the states’ revenue stakes are very high for alcohol, they may not wish to forgo it. On the issue of threshold limits, the Centre wants a common threshold of Rs 10 lakh both for the Centre and states.

GST would do away with most of indirect taxes levied by the Centre and the states like excise, service tax, VAT and other state levies. Finance minister Pranab Mukherjee has promised to bring GST by 2011 but looking at the number of issues that are currently haunting the ministry, the target looks a little difficult to achieve.

Source: Financial Express, India, dated 17/05/2010