Government Panel Recommends Tax Relief to Boost Natural Gas Adoption

A high‑level government committee has recommended multiple fiscal and policy measures aimed at increasing natural gas adoption across India. The recommendations focus on tax rationalisation, duty exemptions and regulatory support to improve affordability and access.

The report has been published by the Petroleum and Natural Gas Regulatory Board. It comes at a time of heightened energy supply concerns linked to geopolitical developments.

Recommendations on Excise Duty and CNG Adoption

The committee has proposed the removal of excise duty on the compression of natural gas produced through liquefied natural gas. This step is expected to reduce costs linked to compressed natural gas and liquid CNG production.

According to the report, lower compression costs would make CNG and LCNG more attractive fuels for transport and industrial users. The committee noted that these measures could encourage a wider shift towards CNG vehicles and cleaner fuel alternatives.

GST Inclusion and Tax Uniformity

One of the key recommendations is to bring natural gas under the goods and services tax framework. The committee suggested placing natural gas in a lower GST slab with full input tax credit.

This move is intended to ensure uniform taxation across states and reduce the cascading effect of multiple indirect taxes. It also highlighted that GST inclusion could support smoother interstate trade in natural gas.

Input Tax Credit and Sectoral Impact

The committee stressed that input tax credit should also extend to sectors such as power generation and petrochemicals. These sectors remain outside the GST regime for their final output but are significant consumers of natural gas.

Allowing input tax credit would lower operational costs and remove tax inefficiencies. Until GST inclusion is implemented, the report advised states to consider reducing value‑added tax on natural gas.

Customs Duty Exemptions and Infrastructure Issues

The report also recommended extending exemptions from basic customs duty and social welfare surcharge on LNG imports. This benefit is proposed for captive power plants and the city gas distribution sector, aligning them with existing exemptions available for LNG used in power generation.

Separately, the regulator has directed CGD entities to ensure pipeline connectivity in 19 priority geographical areas. CGD entities have highlighted challenges such as land handover delays, equipment procurement issues and regulatory approvals from bodies including NHAI and PESO.

Read More: Govt Ensures 100% PNG, LPG Supply Amid West Asia Crisis.

Conclusion

The committee’s recommendations aim to address structural cost and tax barriers affecting natural gas adoption. Measures covering excise duty removal, GST inclusion and customs duty exemptions seek to improve competitiveness across user segments.

The proposals also acknowledge infrastructure and regulatory challenges faced by distribution entities. Overall, the report outlines a coordinated approach to support cleaner energy usage through fiscal and policy reforms.

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