Andhra Pradesh hikes VAT on natural gas by 10%

Amaravati: The state government increased the Value Added Tax (VAT) on natural gas from the present 14.5 per cent to 24.5 per cent on Saturday, with immediate effect.

Rajat Bhargava, special chief secretary of the revenue (commercial taxes) department, issued the orders, making amendment to the existing VAT slab.

The special chief secretary explained that due to Covid-19, there was a drastic fall in the revenue on one hand and the increased welfare schemes posed additional burden on public exchequer on the other. Hence, the 10 per cent increase became inevitable. At present, the government is getting Rs 350 crore per year. After the increase in the VAT, it is expected to generate an additional amount of Rs 250 crore to Rs 300 crore annually, the official informed.

Rajat Bhargava, dispelled misapprehensions among people that the government had hiked tax on LPG (liquefied petroleum gas). In a statement, he clarified that LPG is different from natural gas. After introduction of GST in 2017, LPG, along with all other goods, is subsumed in the GST. The state governments have no power to revise the tax rates of GST subsumed goods including the LPG.

Natural gas is used as input in certain industries and in power generation. It is also used as domestic fuel as "piped natural gas", in certain areas of metro cities but the rate of tax on "piped natural gas" for domestic purposes is only 5 per cent under VAT Act. The fresh notification does not change that rate. Piped natural gas for domestic use continues to be taxed at 5 percent only. The increased tax rate on natural gas is applicable only to the natural gas other than that used for domestic use.