By TIOL News Service

NEW DELHI, SEPT 15, 2013: INDIA's Petroleum and Natural Gas Regulatory Board (PNGRB) has called for introduction of uniform tax regime to facilitate development of robust market for domestic and imported natural gas.

In a report titled ‘Vision 2030 - Natural Gas Infrastructure in India’, PNGRB points out that gas attracts differential tax treatment in different states/provinces within India which restricts free movement and swaps across geographies.

It notes that in swapping of natural gas the ‘title of ownership’ in gas is bartered with that of another entity, nearer to the end consumer, to enable delivery without gas having to travel over avoidable long distances. Swapping of gas helps in managing inherent limitations in handling, storage and transportation of natural gas.

The report says: “Double taxation and the absence of a trading platform make swap arrangements difficult, particularly in emerging gas markets like India. Therefore, it is important to evaluate alternatives to the present differential tax regime for natural gas so that free movement and swapping of gas gets facilitated across India.”

The taxation problems can be resolved by including gas sales under the proposed goods and service tax (GST). Such sales might be put under the highest GST slab to offset any revenue loss to State Governments.

Pending introduction of pan-India GST, gas should be given the ‘declared goods status’ to facilitate levy of the central sales tax (CST) at the lowest rate. Alternatively, CST law should be amended to recognize contractual path to demonstrate sale of gas under CST. The gas transmission at present follows the physical movement of the goods outside the State.

The taxation reform on these lines would not only enable the free movement of gas and encourage swapping and trading of gas but also ensure efficient utilization of pipelines and other infrastructure.

To attract investment in setting up of pipelines and networks resulting in creation of gas trading hubs, the report has suggested that gas transportation industry be given ‘infrastructure status’ under the Income Tax Act to pave the way for tax incentives.

The report has also mooted developing of sub-economical pipelines under public private partnership to facilitate ‘viability gap funding’ by the Government.

It has projected increase in demand for natural gas demand at a CAGR of 6.8% from 242.6 million standard cubic metres per day(MMSCMD) in 2012-13 to 746 MMSCMD in 2029-30.