Panel Urges Excise Duty Removal On CNG And GST For Natural Gas

22 Apr 2026 CW Team

The committee further proposed bringing natural gas within the goods and services tax (GST) framework in a lower tax bracket with full input tax credit to ensure uniform taxation and to reduce cascading levies. The report recommended that input tax credit be extended to sectors such as power and petrochemicals even where outputs remain outside GST, and that states should be encouraged to lower value added tax (VAT) on natural gas until a GST solution is in place. The move was framed as a way to promote interstate commerce.

Regarding imports, the panel urged extension of exemptions from basic customs duty and the social welfare surcharge on LNG to captive power plants and the city gas distribution (CGD) sector, mirroring treatment available to power generation firms. The committee noted that such measures would support fuel security as the country contends with supply disruptions linked to the West Asia conflict and would lower costs for entities that use imported LNG for captive generation or distribution.

In parallel, PNGRB instructed CGD entities to ensure pipeline connectivity for 19 priority geographical areas (GAs) and to address operational bottlenecks. CGD firms reported delays in land handovers, procurement of metering equipment and permissions from statutory authorities including the National Highways Authority of India (NHAI) and the Petroleum and Explosives Safety Organisation (PESO). The panel regarded resolving these impediments and the proposed tax and duty reforms as complementary steps to broaden adoption of gas across sectors.

A high-level government committee has recommended removal of excise duty on the compression of natural gas to accelerate the use of gas across transport and industry. The Petroleum and Natural Gas Regulatory Board (PNGRB) published the committee report recommending that compression arising from liquefied natural gas (LNG) be relieved of excise, and that compressed natural gas (CNG) and liquid CNG become more financially attractive to consumers and businesses. The panel positioned the measures as timely amid concerns over energy supply. The committee further proposed bringing natural gas within the goods and services tax (GST) framework in a lower tax bracket with full input tax credit to ensure uniform taxation and to reduce cascading levies. The report recommended that input tax credit be extended to sectors such as power and petrochemicals even where outputs remain outside GST, and that states should be encouraged to lower value added tax (VAT) on natural gas until a GST solution is in place. The move was framed as a way to promote interstate commerce. Regarding imports, the panel urged extension of exemptions from basic customs duty and the social welfare surcharge on LNG to captive power plants and the city gas distribution (CGD) sector, mirroring treatment available to power generation firms. The committee noted that such measures would support fuel security as the country contends with supply disruptions linked to the West Asia conflict and would lower costs for entities that use imported LNG for captive generation or distribution. In parallel, PNGRB instructed CGD entities to ensure pipeline connectivity for 19 priority geographical areas (GAs) and to address operational bottlenecks. CGD firms reported delays in land handovers, procurement of metering equipment and permissions from statutory authorities including the National Highways Authority of India (NHAI) and the Petroleum and Explosives Safety Organisation (PESO). The panel regarded resolving these impediments and the proposed tax and duty reforms as complementary steps to broaden adoption of gas across sectors.

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