FBR withdraws 2pc ST on lubricant oil supplies

KARACHI: Federal Board of Revenue (FBR) has withdrawn two percent sales tax on lubricant oil supplied by refineries to oil marketing companies to bring down cost of the petroleum product. 

FBR, through a statutory regulatory order (SRO), waived the tax in line with the industry demand. 

Oil refineries are currently bound to collect two percent sales tax in addition to 17 percent payable under the Sales Tax Act, 1990 on lubricant oil supply to oil marketing companies (OMCs), which deduct the tax on subsequent supplies. 

After the SRO, OMCs are also exempted from collecting two percent sales tax on lubricant oil supply to registered industrial consumers. 

The purpose of additional tax was to promote documentation and encourage registration with the tax authorities. However, industrial consumers are reluctant to buy oil from wholesalers and distributors, which are unable to issue sales tax invoice. Without invoice, the buyers could not claims 19 percent of sales tax. Therefore, the industry has been demanding the withdrawal of extra tax for long. 

FBR, however, increased sales tax on electricity consumed for production of steel billets, ingots and mild steel products, excluding stainless steel, to 10.5 percent from nine percent.

“However, the payment of sales tax at the rate of 10.5 percent per unit of electricity shall be the final discharge of liability of steel re-rolling units and composite units of melting and re-rolling including their pre-heating sections operated through fuels other than electricity,” said one SRO.

The notice further said adjustable sales tax of Rs5,600/metric tonne will be levied and collected on import of re-meltable iron and steel scrap and Rs8,400/tonne from other importers, whereas non-adjustable sales tax of Rs5,600/metric tonne will be levied and collected on import of waste and scrap of compressors.

FBR said steel melters are required to submit paid electricity bills of the last three months at the time of filing of goods declaration.

The tax revenue authority also increased sales tax rate for ship breakers who are now required to pay sales tax of Rs8,500/metric tonne as against the previous rate of Rs8,000/metric tonne of re-rollable scrap and other materials obtained from ship breaking on such supplies determined at 80 percent, in case of oil tankers and gas carriers and at 72.5 percent for other vessels.