The Ladakh administration has approved a sharp reduction in VAT on natural gas, bringing the rate down from 21% to 5% for both Compressed Natural Gas (CNG) and Piped Natural Gas (PNG).
The decision, approved by Lieutenant Governor Vinai Kumar Saxena on Thursday, is aimed at making cleaner fuels more affordable and supporting the expansion of the City Gas Distribution (CGD) network across the Union Territory.
Move to support household gas connections
The lower tax rate is expected to improve the economics of expanding CGD infrastructure in Ladakh, where difficult terrain, scattered population centres and extreme weather conditions make energy transportation expensive.
The network is intended to provide piped gas connections to households across the Union Territory while also expanding access to CNG.
The decision followed a June 22 communication from the Petroleum and Natural Gas Regulatory Board (PNGRB), which urged Ladakh to adopt a concessional fiscal framework for natural gas.
PNGRB had pointed to the high cost of transporting energy over long distances in the region as a challenge for developing the gas distribution network.
The regulator has authorised Bharat Petroleum Corporation Limited (BPCL) to develop CGD infrastructure in Ladakh and had recommended bringing CNG and PNG under a VAT rate of 5% or lower to encourage consumer adoption during the initial years.
Ladakh now at par with some states
With the reduction, Ladakh's VAT rate on natural gas is now the same as that levied by states such as Gujarat, Karnataka and Andhra Pradesh.
Natural gas is currently outside the GST framework and remains subject to VAT imposed by individual states and Union Territories.
“Our objective is to make essential energy more affordable to the people of Ladakh while creating an enabling environment for investment and infrastructure development. The reduction of VAT on natural gas will support the expansion of PNG and CNG services, strengthen the clean-energy ecosystem and improve the quality of life of our people. These measures reflect the UT Administration’s commitment to building a more connected, competitive, clean and sustainable Ladakh,” said L-G Saxena.
Earlier VAT cut on aviation fuel
The Ladakh administration had also reduced VAT on Aviation Turbine Fuel (ATF) for civilian aircraft from 26.25% to 1%. That move was aimed at making air travel to Ladakh more competitive and supporting its development as a refuelling hub under the regional air connectivity push.