The Chandigarh administration has reduced the Value Added Tax (VAT) on natural gas from 12.5 per cent to 5 per cent, a move that is expected to lower the tax burden on consumers using compressed natural gas (CNG) and piped natural gas (PNG) in the city.

The reduction took effect from midnight on September 18, according to a notification issued by the excise and taxation department. The order was made under the Punjab Value Added Tax Act, 2005, as extended to the Union territory of Chandigarh.

The notification amends Schedule I of the legislation and prescribes a 5 per cent tax rate for natural gas, including PNG and CNG. The amendment was issued by the UT administrator under powers provided by the Act, making the revised rate applicable from the specified date.

The administration said the lower tax rate would support the development and expansion of natural gas infrastructure in Chandigarh. It also aims to encourage wider adoption of cleaner fuel options among households, businesses and transport users across the city.

The decision comes as the UT administration works to increase the use of PNG. Chandigarh has previously set an ambitious target for PNG connections, although uptake has remained below that goal. The administration’s latest measure is intended to improve the economics of natural gas use and support future network expansion.

The effect on retail prices will depend on how gas suppliers pass the lower VAT through to consumers. The notification changes the applicable tax rate but does not prescribe new retail prices for CNG or PNG, meaning the final reduction may vary by supplier and product.