1. GST setback for consumers: IGL to hike gas prices in Uttar Pradesh; here is how much more they must pay

GST setback for consumers: IGL to hike gas prices in Uttar Pradesh; here is how much more they must pay

Compressed natural gas (CNG) and piped natural gas (PNG) consumers of Indraprastha Gas (IGL) in Uttar Pradesh should brace to pay an extra Rs 3 per unit or 7% for the clean source of energy.

By: | Published: September 2, 2017 5:13 AM
CNG, IGL, PNG, Uttar Pradesh, clean energy Compressed natural gas (CNG) and piped natural gas (PNG) consumers of Indraprastha Gas (IGL) in Uttar Pradesh should brace to pay an extra Rs 3 per unit or 7% for the clean source of energy.(Image: IE)

Compressed natural gas (CNG) and piped natural gas (PNG) consumers of Indraprastha Gas (IGL) in Uttar Pradesh should brace to pay an extra Rs 3 per unit or 7% for the clean source of energy. This is because the gas-distribution company is set to pass on the extra tax burden the GST regime has brought upon it. Since natural gas is outside GST, IGL is unable to avail of input tax credit (ITC) for the GST paid on inputs, effectively increasing its tax liability. According to a senior company executive, as much as 16% of its capex is on account of input taxes — excise and service tax prior to the GST and now GST — and so, denial of ITC has inflated costs significantly.

IGL buys CNG from GAIL (India), on which state-level sales taxes are paid. In UP, the sales tax (VAT) is 26%. However, when IGL sells gas, the VAT collected from consumers in UP is just 10.5%, with the company bearing the brunt of the disparity. Under GST, input taxes can be set off against one’s output tax liability; however, in the case of petroleum products like natural gas that are outside the GST ambit, this facility is not available and input taxes effectively become a cost. IGL incurs GST when it purchases equipment like compressors and dispensers and also when it receives services.

Five petroleum products —crude oil, diesel, petrol, natural gas and aviation fuel — have been kept outside the ambit of GST as states are reluctant to let go of the massive revenue they generate from the sale of these products. Petroleum minister Dharmendra Pradhan, among others, have pitched for inclusion of petroleum products under GST. Companies such as ONGC and PSU oil marketers have also expressed concerns about the denial of ITC to them in the GST regime. In July, IGL increased the price of CNG by `1.11 per kg in Delhi and `1.27 per kg in Noida, Greater Noida and Ghaziabad.

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