Here's why Indraprastha Gas shares gained up to 6% on Tuesday

Shares of Indraprastha Gas Ltd. (IGL) surged as much as 6% on Tuesday, October 7, after sources told CNBC-TV18 that there have been changes in the tax implications on gas that is sourced from Gujarat.

Sources highlighted that a 15% Value Added Tax (VAT) was charged earlier, which will now be revised to a 2% levy of Central Sales Tax (CST). This new measure has taken effect from October 1 this year.

Such a move will lead to lower gas sourcing costs for IGL, thereby having a positive impact on the company's margins.

According to a note from Equirus, such a move will improve IGL's Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) by 20% and lead to cost savings worth ₹360 crore.

"This change does not impact MGL, as a large portion of its APM allocation comes from Uran, Maharashtra, where CST/VAT treatment remains unchanged," Equirus added.

Shares of IGL are trading 5.7% higher on Tuesday at ₹220. The stock has gained 4% in the last one month.