Rs4 Billion Tax Arrears of CNG Stations Might Get Sindh Deprived of Gas
KARACHI: Rift between the Government and CNG filling stations across sindh over tax arrears might end in gas disconnection of supply stations.
A sales tax controversy between CNG filling stations in Sindh and Federal Board of Revenue (FBR) bring a tax arrear to Rs4 billion by November 28 in a lengthy legal battle between the parties.
There remain around 600 CNG proprietors that are to clear the said tax arrears pertain a period between April 2014 and November 2015.
“We have tried speaking to everyone in FBR but they don’t want to listen,” said All Pakistan CNG Association’s Sindh chapter Chairman Shabbir Sulemanjee. “And finance minister is too busy. I am not sure what will happen.” The roots of the issue lie in a Sales Tax Amendment Ordinance, which was issued through a Presidential Order in March 2013.
It allowed FBR to collect 17% sales tax on the value of gas, which the Sui Southern Gas Company (SSGC) sells to CNG stations.
But CNG station owners approached the court. “It was not feasible for us to agree because the effective sales tax was actually 34%,” said Sulemanjee, explaining that CNG stations were not allowed any input adjustments.
Unable to deal with mushrooming growth of CNG stations across the country after a liberalised gas policy was adopted in early 2000s, the FBR has struggled to generate enough revenue from the sector. CNG is generally considered a good cash-flow business where cash from customers is received immediately but payment to utilities is made after 30 days.
FBR first increased sales tax for CNG stations back in 2008. The case went to court, dragged on for years and then a judgment came against tax authorities. The Presidential order of 2013 was issued to counter the after-effect.
CNG station owners say the government has capped retail price, making it difficult for them to recover cost.
“A CNG station business needs capital investment of around Rs100 million. We would want a return-on-investment (ROI) of at least 15%,” Sulemanjee said. “But how do you expect us to earn that when the retail price of CNG is Rs67.5 per kg and our cost is more than that.”
The association has threatened to go on strike if tax officials do not come to the negotiating table.
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