CNG price to go up Rs3/kg if proposed with holding tax not reversed

ISLAMABAD: CNG Association has informed the Senate Standing Committee on Finance that CNG price would go up by Rs3/kg if the Federal Board of Revenue (FBR) did not reverse its proposed amendment to increase withholding tax on all incidental charges.

“We will become uncompetitive with increased tax burden and will be forced to close down our CNG pumps,” the representatives of the CNG Associations told the Senate Panel, which met under the chairmanship of Senator Saleem Mandviwalla at Parliament House on Tuesday.

The FBR proposed changes in collection of advance tax as earlier four percent tax was charged as final tax from CNG pumps. Under the proposed mechanism, the FBR would add incidental charges and then tax, which according to CNG association will increase tax burden from four percent to 6.5 percent.

The FBR high-ups explained that there was confusion over this clause, so the FBR made explanation through Finance Bill 2017-18. 

The Ministry of Finance and the association agreed on the amount of Gas Infrastructure Development Cess (GIDC) to the tune of Rs12 billion from 2011 to 2015. The Finance Ministry demanded payment of 60 percent (Rs7.2 billion) upfront out of the total outstanding liabilities.

However, the CNG Association said they could only pay only 30 percent (Rs3.1 billion) upfront within this month.  Finance Ministry’s Additional Secretary Budget told the committee that the government asked them to pay 60 percent upfront amount within the outgoing fiscal year ending on June 30, 2017 and the remaining 40 percent could be negotiated in shape of instalments.

There are 3,000 members of CNG association and they can easily manage to collect Rs7 billion in one go, said the Finance Ministry official. The government had provided maximum relief and no further incentives could be offered without prior approval of Finance Minister or Secretary Finance, they official added.

The Senate Panel proposed that this upfront amount should be fixed at Rs4 billion which the CNG association should pay within the ongoing month, while the remaining instalments would be finalised for the next financial year. “But the CNG association will have to provide guarantee that they will withdraw cases from the courts.”

On import of raw material for plastic industry, there is zero percent duty in case of industrial importers if they provide exemption certificate, while commercial importers will pay six percent tax. Since the manufacturing units were importing more raw materials and selling into markets, misuse of concessionary regime has been on the rise.

The ruling party MNA Qaiser Ahmed Sheikh, who is also holding portfolio of chairman National Assembly Standing Committee on Finance, appeared before the Senate panel to plead the case of the plastic industry, and told Senators that the FBR had agreed to bring down tariff on 25 items, including raw material of plastic industry.

Keeping in view huge revenue impact, the FBR reduced duty structure only for raw material of plastic industry.