Drop extra VAT on regasified LNG: Industry

New Delhi: The renewable energy industry has sought urgent government intervention to stop additional VAT being charged on regasified liquefied natural gas (RLNG) supplied from Gujarat to industrial consumers in other states amid supply disruptions.

In a letter to the ministry of petroleum and natural gas, a copy of which ET has seen, the National Solar Energy Federation of India (NSEFI) has called for waiver or neutralisation of this additional interstate value added tax (VAT), flagging concerns over operational viability of gas-dependent industries outside Gujarat. One of these industries is solar glass manufacturing.

"We... request your kind intervention for issuance of suitable directions to the concerned ministries/authorities for waiver, reimbursement... of the additional interstate VAT burden on RLNG supplied from Gujarat to industrial consumers located outside Gujarat," the industry body said.


While intra-state gas supplies within Gujarat attract a VAT of around 6%, interstate supplies face a significantly higher levy of about 15%, NSEFI said. This effectively imposes an additional 9% tax burden on industries located outside Gujarat.

NSEFI noted that domestic natural gas supplies to industrial users have been curtailed due to supply disruptions caused by the West Asia war, leading companies to rely more on RLNG-or LNG converted back into gas-to manage operations. As a high portion of India's LNG import and regasification infrastructure is in Gujarat, industries across the country are dependent on supplies routed through the state.

While intra-state gas supplies within Gujarat attract a VAT of around 6%, interstate supplies face a significantly higher levy of about 15%. This effectively imposes an additional 9% tax burden on industries located outside Gujarat despite operating under identical national conditions, NSEFI said.

The higher cost burden is expected to strain working capital cycles, disrupt production continuity and impact downstream supply chains, it said.