Still a sunrise industry?: FBR retains CNG sector’s special regime status
Waives penalties, additional GST, allows sector to file returns on quarterly basis.
Waives penalties, additional GST, allows sector to file returns on quarterly basis. ILLUSTRATION: JAMAL KHURSHID
ISLAMABAD:
The special procedures established in the past in the name of ‘facilitation’ are becoming obstacles in the drive to expand the tax base and increase revenues, as the authorities have exempted the compressed natural gas (CNG) sector from the registration requirement and retained its special regime status.
The government has also waived off penalties and additional taxes imposed against any non-registered sector, highlighting signs of administrative and regulatory weaknesses that are hampering in broadening the tax base.
The move came just two months after the ratification of the budget by parliament and was seen as counterproductive to measures announced in the budget to expand the tax base and reduce the size of the informal economy.
In the budget 2013-14, the government imposed 1% additional sales tax in addition to the general sales tax (GST) on supplies of goods made to unregistered persons by registered persons. Through promulgation of the statutory regulatory order 509, a levy of 5% was also imposed on electricity and gas bills of above Rs15,000 of unregistered persons.
Finance Minister Ishaq Dar has given the approval to a summary seeking exemption of the CNG sector from the registration requirement in addition to 6% penalties and additional taxes, according to sources. As it will take some time to issue a notification for exemption, the Federal Board of Revenue (FBR) has asked the gas utility companies not to charge additional 6% taxes from the CNG stations until it issues the governing SRO.
In order to discourage fraudulent refunds, the FBR had authorised the Sui Northern Gas Pipelines (SNGPL) and Sui Sothern Gas Company (SSGC) to charge 26% tax from the CNG stations on behalf of the government.
Under the same arrangement, the FBR had exempted the CNG sector from the requirement of filing monthly sales tax return and instead asked them to file quarterly sales tax returns.
“On the basis of filing returns on a quarterly basis, the FBR’s system treats the CNG sector as unregistered sector,” said Ghayas Paracha, chairman of the supreme council of the All Pakistan CNG Association. He claimed that the CNG sector was ready to submit monthly sales tax returns, but the FBR was not willing to accept this.
The sector currently pays a fixed income tax at a rate of 4% of the total gas utility bills. As the government decides to keep the sector under a ‘special regime’, CNG station owners will keep filing returns on nominal income tax rates.
Paracha said since CNG prices were reduced on the intervention of the Supreme Court of Pakistan, the profits of the sector have significantly been squeezed and the sector is willing to pay taxes under the normal regime.
The FBR wants to bring the sector into the normal regime, but had to maintain its special sector status under peculiar conditions, according to senior FBR officials. Had the FBR not exempted the sector from penalties, the CNG owners would have passed the impact onto consumers, they added.
The officials said any increase in the CNG prices will infuriate the Supreme Court that has already taken the FBR to task for levying 26% sales tax on the sector.
Any attempt by the CNG sector to increase prices on the basis of non-registration penalty will be treated as an administrative failure. It is also the responsibility of the Oil and Gas Regulatory Authority (Ogra) to make sure that the CNG stations do not sell the product over and above the determined cost.
The FBR officials said if the CNG sector comes under the normal category, it will increase the sales tax base. Total active sales tax registered persons in the country are below 100,000.
On the eve of the budget, the tax authorities had justified the penalties on unregistered persons as a move to make staying unregistered commercially unviable and encourage them to get registered with the FBR.
Published in The Express Tribune, September 4th, 2013.
The special procedures established in the past in the name of ‘facilitation’ are becoming obstacles in the drive to expand the tax base and increase revenues, as the authorities have exempted the compressed natural gas (CNG) sector from the registration requirement and retained its special regime status.
The government has also waived off penalties and additional taxes imposed against any non-registered sector, highlighting signs of administrative and regulatory weaknesses that are hampering in broadening the tax base.
The move came just two months after the ratification of the budget by parliament and was seen as counterproductive to measures announced in the budget to expand the tax base and reduce the size of the informal economy.
In the budget 2013-14, the government imposed 1% additional sales tax in addition to the general sales tax (GST) on supplies of goods made to unregistered persons by registered persons. Through promulgation of the statutory regulatory order 509, a levy of 5% was also imposed on electricity and gas bills of above Rs15,000 of unregistered persons.
Finance Minister Ishaq Dar has given the approval to a summary seeking exemption of the CNG sector from the registration requirement in addition to 6% penalties and additional taxes, according to sources. As it will take some time to issue a notification for exemption, the Federal Board of Revenue (FBR) has asked the gas utility companies not to charge additional 6% taxes from the CNG stations until it issues the governing SRO.
In order to discourage fraudulent refunds, the FBR had authorised the Sui Northern Gas Pipelines (SNGPL) and Sui Sothern Gas Company (SSGC) to charge 26% tax from the CNG stations on behalf of the government.
Under the same arrangement, the FBR had exempted the CNG sector from the requirement of filing monthly sales tax return and instead asked them to file quarterly sales tax returns.
“On the basis of filing returns on a quarterly basis, the FBR’s system treats the CNG sector as unregistered sector,” said Ghayas Paracha, chairman of the supreme council of the All Pakistan CNG Association. He claimed that the CNG sector was ready to submit monthly sales tax returns, but the FBR was not willing to accept this.
The sector currently pays a fixed income tax at a rate of 4% of the total gas utility bills. As the government decides to keep the sector under a ‘special regime’, CNG station owners will keep filing returns on nominal income tax rates.
Paracha said since CNG prices were reduced on the intervention of the Supreme Court of Pakistan, the profits of the sector have significantly been squeezed and the sector is willing to pay taxes under the normal regime.
The FBR wants to bring the sector into the normal regime, but had to maintain its special sector status under peculiar conditions, according to senior FBR officials. Had the FBR not exempted the sector from penalties, the CNG owners would have passed the impact onto consumers, they added.
The officials said any increase in the CNG prices will infuriate the Supreme Court that has already taken the FBR to task for levying 26% sales tax on the sector.
Any attempt by the CNG sector to increase prices on the basis of non-registration penalty will be treated as an administrative failure. It is also the responsibility of the Oil and Gas Regulatory Authority (Ogra) to make sure that the CNG stations do not sell the product over and above the determined cost.
The FBR officials said if the CNG sector comes under the normal category, it will increase the sales tax base. Total active sales tax registered persons in the country are below 100,000.
On the eve of the budget, the tax authorities had justified the penalties on unregistered persons as a move to make staying unregistered commercially unviable and encourage them to get registered with the FBR.
Published in The Express Tribune, September 4th, 2013.