In a move aimed at improving revenue generation significantly and reducing environmental pollution by encouraging industry to shift to natural gas, Punjab Government on Friday notified reduction in VAT (value added tax) on Natural Gas, in gaseous State other than compressed natural gas, from 14.3 to three per cent.
With this, Punjab has become the State with the lowest VAT on natural gas in the northern region, also comprising Haryana, Himachal Pradesh, Rajasthan, Delhi and Chandigarh.
The notification, issued in pursuance of a decision taken earlier by the State Government, will incentivize the industrial units in the State to switch over from polluting fuel to the environment-friendly natural gas, thus reducing industrial pollution in the State.
Also, with the reduction in the rate of VAT, the sale of natural gas in Punjab is likely to increase substantially, thereby yielding increased revenue.
An official spokesperson said that at present, the rate of VAT on natural gas is 13 percent plus 10 per cent surcharge, that is 14.30 per cent in Punjab.
“The major consumer of gas is National Fertilisers Limited (NFL), which uses the gas at its plants at Bathinda and Nangal,” said the spokesperson adding that the decision will also give a boost to many industrial units in Gobindgarh and Ludhiana to replace conventional fuel.
Notably, the NFL is purchasing natural gas worth Rs 300 crore per month from Gujarat, on which CST (central sales tax) of Rs 45 crore per month at the rate of 15 per cent is being paid to that State.
With the cut in VAT on natural gas, the natural gas supplier will start billing of natural gas to NFL from Punjab, which can lead to increase in Punjab’s VAT collection on natural gas.
Before March 2015, VAT rate on natural gas was 5.5 percent plus 10 per cent surcharge, that is 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 the years 2014-15 to 2018-19 came down considerably.
