Union Budget 2022: What Are The Demands Of Oil And Gas Industry

In its pre-budget memorandum to the finance ministry, Government of India, the Federation of Indian Petroleum Industry (FIPI) urged that GST on natural gas transit via pipeline be rationalized. The sector also desired that natural gas's part of the country's energy basket be increased. Currently, Natural gas is exempted from GST, and existing legacy taxes such as central excise duty, state VAT, and central sales tax continue to apply to the fuel. In this article, we have highlight these demands in categories.

Including natural gas in the GST regime

In its pre-budget memorandum, the FIPI expressed optimism that the gas will be subject to GST. They stated that the government should include natural gas in the Goods and Services Tax (GST) regime to realize Prime Minister Narendra Modi's vision of a gas-based economy and increase the share of the environmentally friendly fuel in India's energy basket. Bringing natural gas under the GST regime will help to provide uniform taxation. FIPI also urged the GST on natural gas pipeline transportation.

Increasing natural gas's share in India's major energy basket

The government has set an aim of increasing natural gas's proportion of the country's primary energy basket to 15% by 2030, up from 6.2 percent today. Increased usage of natural gas will reduce fuel costs while also lowering carbon emissions, assisting the country in meeting its COP-26 goals. Raising the share of natural gas in India's primary energy basket from current 6.2%

GST on natural gas transportation should be rationalised

Rationalization of GST rate on natural gas pipeline transportation services by levying 5% tax with input tax credit (ITC) advantage instead of the current 12%. This would result in lower natural gas transportation costs and will aid in the development of cleaner sources of energy for electricity and CNG where ITC of GST paid on natural gas transportation is not available, according to the FIPI's pre-budget brief.

Imported LNG re-gasification

According to FIPI, imported LNG must be re-gasified and transformed into natural gas for transit and consumption in India. The activity of LNG regasification now attracts a high GST of 18%. The imposition of a higher GST on LNG regasification raises the landing cost of imported LNG for domestic industrial users. GST on re-gasification of imported LNG should be reduced to assist reduce the cost of the environmentally beneficial fuel. Doing this will help bring down the cost of environment-friendly fuel in the country.

Lowering of import duty on LNG

The industry does request that the import tariff on LNG be reduced to increase the efficiency of the polluting liquid fuel. LNG is a clean fuel that is widely used in the fertilizer and power industries. Because there is less gas in the country, the administration has increased LNG imports. Currently, LNG imports are subject to a 2.5% tax as well as a 10% SWS (Social Welfare Surcharge) cess. However, the basic customs charge on crude oil imports is merely Rs 1 per tonne. Because LNG falls into the same logical category as crude oil, it must be taxed at the same rate as crude oil.