Deloitte India• Jan 22, 2026• 1:54Interview

Union Budget 2026 Expectations - Sanjay Sah, Partner, Deloitte India

Sanjay Sah•Partner, Deloitte India

Executive Summary

India has a national goal to more than double the share of natural gas in its energy mix, from the current 7% to 15%, positioning it as a key clean fuel.
The current tax structure for the natural gas value chain is highly fragmented, involving a mix of state-level VAT, national GST on various components, and excise duties, which complicates operations and increases costs.
There is a significant, long-standing demand to bring natural gas under the national GST framework to streamline taxation, reduce inefficiencies, and optimize the entire value chain.
The growth of Compressed Biogas (CBG), a key alternative to imported gas, is hindered by tax disparities with natural gas and an inverted duty structure under GST, creating operational and financial challenges.

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Concerns Raised

The fragmented tax system (VAT, GST, excise duty) creates inefficiencies and high costs across the gas value chain.
An inverted duty structure for Compressed Biogas (CBG) makes projects financially unviable.
Different tax treatments for natural gas and CBG create operational challenges for commingling the two gases.

Opportunities Identified

Significant market growth potential driven by the national goal to increase natural gas share from 7% to 15%.
Major efficiency gains and cost reductions if natural gas is brought under the GST framework.
Developing the domestic Compressed Biogas (CBG) sector to reduce reliance on energy imports.

Key Themes

India's Natural Gas Ambition

The transcript highlights India's strategic objective to significantly increase natural gas consumption. This policy is driven by the fuel's cleaner properties compared to other fossil fuels and aims to shift the national energy mix.

This national goal signals a long-term growth market for natural gas infrastructure, supply, and related services, representing a major opportunity for energy companies.

Fragmented Energy Taxation

The current tax regime for natural gas is a complex patchwork of different levies. While components like LNG terminals, compression services, and CNG dispensers are under GST, the gas itself is subject to state-level VAT, and compression also attracts an excise duty.

This complexity creates significant compliance burdens, increases both capital and operational expenditures (capex/opex), and distorts market efficiency, acting as a major barrier to investment.

The Case for GST Unification

A central point is the persistent call to bring natural gas under the unified GST framework. This move would simplify the tax structure, allow for input tax credits across the value chain, and create a more predictable and efficient market.

Implementing this reform would be a major catalyst for the sector, potentially lowering end-consumer prices, boosting demand, and making investments in the gas value chain more attractive.

Compressed Biogas (CBG) Policy Hurdles

While CBG is promoted as a domestic alternative to imported gas, its policy framework creates obstacles. CBG falls under GST while natural gas does not, causing issues when they are mixed. Furthermore, CBG faces an inverted duty structure where input taxes are significantly higher than the tax on the final product.

These tax and policy inconsistencies disincentivize investment in the CBG sector, slowing down its development and undermining India's goal of reducing gas import dependency.

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Topics

India Energy Policy Natural Gas Goods and Services Tax (GST)Tax Reform Energy Taxation Compressed Biogas (CBG)Value Added Tax (VAT)Inverted Duty Structure Energy Transition Gas Infrastructure Capex Opex Import Substitution Clean Energy

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