Tax liability on supply of CNG from retail outlet under GST regime

In this article issue of tax liability on supply of compressed natural gas (CNG) from retail outlet under GST regime has been discussed with special reference to Maharashtra state. Dealer is running CNG pump and being it is retail outlet, all sales are made to the customers who are unregistered dealers under Mvat act. It has effected purchases of CNG from registered dealer and paid tax on such transactions to the vendor. It has not collected any taxes from customers on sales of CNG. In this background tax liability on supply of CNG is discussed as under.

Q1. Whether supply of CNG (compressed natural gas) from CNG pump is liable to pay tax under GST act ?

Section 9 of GST act states that GST shall be levied on all supply of goods or services or both at notified rate except on supply of alcoholic liquor for human consumption. However,it is specifically made clear in the section 9 (1) of the act that tax on supply of goods natural gas shall be levied on notified date only. CNG is covered under natural gas. Government did not issued such notification till date hence no tax shall be levied on supply of natural gas under GST act. In view of aforesaid discussion it is seen that impugned supply of CNG is not liable to pay tax under GST act.

Q2. Whether sale of CNG (compressed natural gas) from CNG pump is liable to pay tax under Mvat act ?

After implementation of GST act, Government of Maharashtra has amended the Mvat act and restricted scope of levy of tax on goods covered under section 2 (12) of Mvat act. Section 2 (12 ) covers only following goods.

a) Petroleum crude.

b) high speed disel.

c) Motor spirit ( commonly known as Petrol ).

d) Natural gas.

e) Aviation turbine fuel.

f) Alcoholic liquor for human consumption.

Accordingly, government has power to levy tax on sales of above referred goods. CNG is covered under natural gas. Commissioner of Sales Tax Maharashtra state has vide Trade Circular no 3 T of 2018 clarified that sale of CNG is laible to pay tax under Mvat act, while explaining meaning of notification dated 24-08-2017. In view of above, I am of opinion that sales of CNG from CNG pump is liable to pay tax under Mvat act.

Q3. If sale of CNG is liable to pay tax under Mvat act, whether it is exempted from whole of tax like motor spirit ?

Government of Maharashtra has, vide notification dated 30-11-2006, exempted sale of motor spirit from whole of tax subject to satisfaction of prescribed conditions. Accordingly, sale of petrol and disel are exempted from whole of tax. However, no such notification has been found issued to exempt sale of CNG from whole of tax. In view of aforesaid discussion, it appears that sale of CNG is not exempted from whole of tax like disel and petrol.

Q4. What is correct rate of tax applicable on sale of CNG from CNG pump to customers ?

CNG is covered under natural gas. As per schedule entry B-15 of the act, sale of CNG to the customers who are not registered dealers, are liable to tax @ 13.5 %. However, in view of schedule entry B-16, sale of CNG to registered dealers for specified purpose and subject to to satisfaction of prescribed conditions, is liable to tax at reduced rate @ 3 %. It is pertinent to note that this reduced rate is applicable only when it is made to registered dealers who are certified by commissioner under said entry and have satisfied prescribed conditions. Thus, sales of CNG to the customers who are not registered dealers are liable to tax @ 13.5 % instead of @ 3 %. Mvat act permit registered dealer to collect tax on sale at schedule rate. Hence, dealer may collect tax on sales as per provisions of law from the customers. In view of aforesaid discussion it is clear that correct rate of tax applicable on sales of CNG to the customers from CNG pump are exigible to tax @ 13.5 % under entry B-15.

Q5. Whether set off is admissible in respect of tax paid on purchases of CNG ?

Under Mvat act, registered dealers are entitled to claim set off on tax paid on purchases, in view of provisions of section 48 of the act and rule 52 of Mvat rules. Registered dealer is eligible to claim set off in respect of tax paid purchases of goods which are resold in view of provision of rule 52 of Mvat rule, subject provisions of rule 53,54 and 55. Purchases of CNG has been effected from registered dealer and tax paid thereon. The goods ie CNG are resold to the customers locally. In view of facts and considering provisions of act and rules dealer is eligible to claim set off on impugned purchases of CNG. In view of above it is clear that set off is admissible on tax paid on purchases of CNG, subject to provision of act and rules.

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