A demand to give "declared goods status" to natural gas has grown stronger with the Federation of Indian Chambers of Commerce and Industry (FICCI) joining an industry chorus on the issue, aiming to give the fuel the same status as coal in order to avoid inconsistencies in taxing the input considered vital for the power and fertliser sectors.
FICCI has sought the intervention of Finance Minister P Chidmabaram and Petroleum Minister Murli Deora to address the issue and also urged an empowered committee of state finance ministers on value-added tax to give it the status that would liberate the fuel from being taxed at various points and also spare it from high rates of taxation that would add to costs.
Coal and crude oil currently enjoy a "declared goods" status. Coal is subjected to sales tax at only 4 per cent, said a FICCI note on the issue.
The FICCI note says that natural gas is clean, abundantly available, cost competitive and a key source of energy for power, fertilizer, petrochemicals and some other industries. Projections available from alternative sources of gas consumption are indicative that it would be the most preferred fuel in the global energy basket over the next two decades, it says.
Natural gas and regassified liquefied natural gas (RLNG) are currently subject to varying sales tax rates in different states, some of which charge as high as 20 per cent. Some states including Assam and Madhya Pradesh also deny input credit for value added tax for gas consumers, which ends up increasing the effective tax payment.
They industry chamber said as electricity is exempt from VAT, the power generating companies have no choice but to absorb the entire burden as they cannot claim deduction of input tax credit.