Saurabh Patel hints at VAT cut on CNG in Gujarat

Vol 15, PW 1 (14 Jul 11) People & Policy

Gujarat energy minister Saurabh Patel has hinted that the BJP-led state government might slash VAT on CNG sales as an incentive to voters in next year’s state elections.

“Don’t expect a formal announcement before the February 2012 budget (in Gujarat’s legislative assembly),” said Patel, speaking exclusively to PETROWATCH on July 5 at his Gandhinagar office. “Even if I want to slash VAT right away, I can’t do anything before the budget is presented.

” If true, more than half a million people in Gujarat who own CNG-fuelled vehicles will stand to benefit: Gujarat’s killer VAT regime of 15% on CNG is the highest in India. Four years ago, the BJP won 117 of the 182 seats in Gujarat’s assembly and scored a resounding victory against the Congress Party, which controls India’s union government in Delhi.

But Gujarat’s high taxation regime on daily commodities like CNG has always been a major concern for the voters who returned Modi to power with a landslide victory. No VAT is charged on CNG in the National Capital Region of Delhi, while Haryana and Maharashtra, controlled by Congress, have a VAT rate of only 12.25% on CNG.

In Tripura, ruled by a coalition of Indian leftist parties, VAT on CNG is again 12.25%, while in India’s most heavily populated state of Uttar Pradesh, it is 13.5%. In the southern Indian state of Andhra Pradesh, it is 14.5%.

When introduced to Gujarat for the first time in the early 90s, CNG was hailed as a cheap alternative to petrol. “The average Gujarati is cost-conscious and likes to save money wherever he can,” comments a Gujarat-based retail gas player.

“Any reduction in VAT on CNG will be reflected in the CNG price and prove a major incentive to voters!” State-owned GSPC Gas is currently selling CNG in Ahmedabad at Rs 40.25/kg ($0.88).