Goods and Services Tax (GST), the indirect tax reform initiative of Government of India, proposed to be started from July 1, 2017, have released rates for most of the identified basket of goods. The main disbelief for the biogas sector is the announcement of 12% tax rate for biogas. In the present tax regime, incentives and support measures are available to promote the sector in form of Excise Duty exemption for biogas production, and its usage through upgradation to bio-methane, piped gas, compressed biogas, electricity and heat generation, and so on. The states also provide complete exemption or concessional VAT rates to the maximum tune of 5% for biogas.
The beneath table makes a comparative analysis between the existing tax regime and the one recommended in the recent published GST rate schedule pertaining to biogas.
|S. No||Description of Item||Chapter no. defined in GST rate schedule for goods||Rates as mentioned in GST rate schedule for goods||Applicable Tax rate as per present regime|
|2||Bio-gas plant devices & spare parts for its manufacture||84 and 85||5%||
With India aggressively turning towards renewable energies, it's imperative to recognize the biogas sector as the potent engine in the energy mix. Biogas projects yields outputs in the form providing a clean gaseous fuel, organic fertilizer, reduction in GHG emission, opportunity to provide large scale employment, and above all abatement of pollution from all types of wastes namely, biomass, agro-residues, manure, urban, and industrial waste.
Unequivocally, all current tax exemptions provided to the biogas sector should be subsumed under the GST regime. Additionally, as mentioned above, despite the VAT rate varying from concession to compete exemption from state to state, a rational approach should be adopted to consider complete exemption of this component upon subsuming into GST. This would ensure that the sector, which is presently lagging way too behind is provided the much needed impetus, to unlock its true potential.
The key highlights of the changes that could be instrumental in providing the necessary push for the industry are as addressed underneath:
- 1. The applicable GST rate for generation of biogas along with any of its upgraded forms essentially 'Piped Biogas', 'Compressed Biogas', and 'Clean Biogas (Biomethane)' should be NIL as opposed to the proposed 12 % in chapter 27 of GST schedule rate list.
- 2. GST rate for the by-products generated in biogas plant; bio-slurry used as organic fertilizer, bio-CO2 generated upon purification of raw biogas should be NIL. In the present regime, these by-products from biogas plant don't have any specific recognition.
- 3. Considering that electricity has been kept outside GST, the developer / operator should be eligible to get tax refunds, if any paid-on goods and services used for setting up the electricity generating biogas project.
- 4. Over and above the exemptions; currently, provided to equipment and machinery used in biogas plants, the GST rate should be NIL as opposed to 5 % mentioned in Chapter 84 and 85 of the GST schedule rate list. Such equipment must also qualify for zero rated category, so that its manufacturers / dealers are eligible to avail credit of GST on their inputs raw material and services.
On behalf of stakeholders of the biogas sector, Indian Biogas Association (IBA), an organization of nationwide professionals in biogas and bio-energy having sole motto of 'propagating biogas and bio-energy in a sustainable way', has offered its fullest support to the above-mentioned amendments. IBA also started a petition campaign, "GoI - No Tax on Biogas: A campaign to remove the proposed high GST rate on Biogas and its products". Within a week's time of its launch on 22nd May, the campaign has been concurred upon by more than 7000 supporters, and the number is ballooning every day. To check live status of the petition,
please use the link: https://goo.gl/5FkaMh