High taxes irritate CGD operators in Gujarat

Vol 14, PW 23 (19 May 11) Midstream & Downstream

Gujarat chief minister Narendra Modi loves to blame the central government in Delhi for not allocating enough domestic gas supplies to the state.

But in private some Gujarat-based retail gas players say Modi should take a good hard look at his own taxation policy and its effect on Gujarat CNG prices. One industry source is terrified that rising CNG prices coupled with a killer taxation regime could lead car owners to give up on using CNG as fuel altogether and switch back to petrol.

On May 5, state-owned retail gas players GSPC Gas and Sabarmati Gas raised their CNG selling price in Gujarat to Rs37/kg ($0.82 cents). Compare this to the CNG selling price in Delhi of Rs29.30/kg ($0.65 cents) or Mumbai where it is Rs31.47/kg ($0.70 cents) and it’s easy to see why they’re angry.

“Ideally CNG should have a low taxation regime,” says a CNG analyst. “But taxes on CNG work out to 39.62% in Gujarat.

” This, he explains, includes VAT at 15%, excise duty at 14.32% and a service tax of 10.3%. “Gujarat is the only state in India where there is a VAT of 15% on CNG sales,” we learn.

States like Haryana, Maharashtra and Tripura have 12.25% VAT on CNG sales while India’s most heavily populated state Uttar Pradesh has a VAT of 13.5% on CNG. In the southern state of Andhra Pradesh, VAT is 14.5% while in Delhi there is no VAT at all on CNG.

Only service tax at 10.30% and excise duty at 14.32% are uniform for all CNG players in India. But compare the Ahmedabad CNG price to the price of petrol and CNG still looks like a good deal for now.

However, this is little consolation to local customers who have seen CNG prices rise dramatically since December 2009 when GSPC Gas was selling it in Ahmedabad at just Rs28/kg ($0.61).