Leading industry body ASSOCHAM has called for inclusion of natural gas in the list of declared goods under section 14 of the Central Sales Tax Act with reasonable and uniform value added tax (VAT) across the country.

VAT laws of some states restrict availing input tax credit if natural gas is used as fuel and fertiliser feedstock. After the introduction of VAT from April 2005, natural gas was kept under revenue-neutral rate of 12.5 per cent.

In Rajasthan it is levied at five per cent under industrial input but some states are levying sales tax at 20 per cent, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Natural gas has emerged as a clean and energy-efficient resource, a key industrial input and the most preferred fuel due to its environment-friendly nature. The fertiliser and power sector consume over 70 per cent volume of natural gas available in India.

Due to high rate of sales tax or VAT coupled with entry tax and many restrictions with regards to availing input tax credit, the consumers get adversely affected, said ASSOCHAM in pre-Budget memorandum for 2011-12.

Fertiliser manufacturers are not allowed to pass on the entire burden of certain levies. As both sectors are highly subsidised, the burden on exchequers increases due to rise in costs and levies.

Considering the importance of fertilisers as input for agriculture and of electricity for industrial and domestic use, said the chamber, it is imperative that natural gas should be given due credence as the goods of special importance for inter-state trade.

The consumption of fertilisers and electricity is spread across the country. So cost reduction by way of sales tax rationalisation and reform will help the national economy, said ASSOCHAM.

At present, coal, crude oil, LPG domestic and aviation turbine fuel sold to turbo-prop aircraft are listed as declared goods. Natural gas is the future energy source for the industry and it is worthwhile to promote its use in place of other fuels, said ASSOCHAM.