Row between state-owned gas companies intensifies

SNGPL, SSGC at odds over deduction of withholding tax on LNG re-gasification

ISLAMABAD: The dispute between the two big government companies namely Sui Northern Gas Pipelines Limited and Sui Southern Gas Company (SSGC) has intensified over the issue of deduction of Rs1 billion in withholding tax on re-gasification of imported LNG.

SSGC has approached the Ministry of Energy to retrieve the deducted amount of Rs1 billion from SNGPL. In this regard, the Ministry of Energy has prepared a summary and sent it to the finance ministry for implementing the decision of the Economic Coordination Committee (ECC) to address the anomaly.

According to officials, the finance ministry has sent the summary to the Federal Board of Revenue to examine the matter and FBR officials say that the summary received from the Ministry of Energy is being examined and the matter will be decided while keeping in view the ECC's decision.

If, according to the ECC's decision, the exemption of tax on the imported RLNG's re-gasification has been approved since July 2015 then amendments in the related clauses of the income tax will be undertaken to address this anomaly. However, if in the ECC's decision, the approval for the implementation is not included since July 2015, then no amendments will be made and to avail exemption from July 2015, approval will need to be taken again from the ECC.

According to a copy of the summary available with The Express Tribune, SSGC had also written a letter on February 16, 2019, in which attention had been sought on this matter but no action was taken. In the letter written again, it has been said that since the business of RLNG started in March 2015, anomaly in the income tax laws have been found, while the SSGC is providing exemption to Engro Terminal Private Limited (ETPL) from withholding tax. However, the SNGPL in its payment in this matter to the SSGC subjected the payments to 8% deduction under the withholding tax while the SSGC has no earnings from the payments by the SNGPL and these payments were received under the re-gasification of the RLNG, which are exempted from income tax.



According to the documents, the Ministry of Energy raised this matter with the finance ministry and sent the summary after preparing it to the ECC upon which the committee, in its meeting held in April 2018, said that the payments received by SSGC from SNGPL under the regasification are actually paid to the Engro terminal and these payments are exempted from tax under the income tax ordinance's section 153 (b) (1), which is effective since July 2015.

In this regard, SNGPL spokesman told The Express Tribune that according to the law the due tax is deducted and added to the national exchequer. "If any anomaly is found, then amendments to relevant section of the income tax ordinance are the responsibility of SSGC and the company needs to make efforts to achieve the goal."

If the government makes an amendment to the law, then SNGPL will cease these deductions as per the law, the spokesman remarked, adding that until a notification in this regard is issued the company cannot give exemptions on its own.

SSGC spokesperson Muhammad Safdar said that they had not received any response to the letter so far.