With an aim to reduce multiplicity of taxes and improve the business climate, Oil Minister Dharmendra Pradhan has expressed hoped that Finance Minister Nirmala Sitharaman will signal the inclusion of aviation turbine fuel (ATF) and natural gas under the ambit of Goods and Services Tax (GST). Finance Minister is scheduled to present the Union Budget for 2020-21 fiscal on February 1. When the Goods and Services Tax (GST) was introduced on July 1, 2017 amalgamating 17 central and state levies, five commodities namely crude oil, natural gas, petrol, diesel, and ATF were kept out of its purview given the revenue dependence of state governments on this sector.
Including ATF and natural gas will not just help companies set off tax that they paid on input, but will also bring about uniformity in taxation on the fuels in the country. Including natural gas in GST is said to be one of the biggest drivers of not just consumption but will also incentivize producers to spend more on finding and producing more gas as well as incentivize importers to bring in more LNG. ATF makes up for almost half of the cost of an airline and rates vary from state to state depending on local VAT. A uniform GST would also push the usage of environment-friendly natural gas, whose share in the energy basket the government wants to increase to 15% by 2030 from current 6.2%.
Pradhan has been making a case for the GST Council – the highest decision-making body of the new indirect tax regime – to take a decision in favour of these two fuels at the earliest. Under the existing structure, both natural gas and ATF attract the Centre’s excise duty and a state’s value-added tax (VAT). Both these and all other levies will get subsumed under GST if they are brought under its ambit. The decision on their inclusion depends on the financial position of states as revenues from these five petroleum products constitute a substantial chunk of state government finances.