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September 19, 2018
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Govt limits scope of reduced sales tax on RLNG supply

Business

September 19, 2018

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KARACHI: Government on Tuesday proposed a 12 percent sales tax on liquefied natural gas (LNG) and re-gasified LNG supplied to state-owned suppliers, while the rate of 17 percent will remain the same for others.

The reduced sales tax rate is applicable to LNG/RLNG “if (it is) supplied to gas transmission and distribution companies,” the government said in the Finance Supplementary (Amendment) Act 2018.

The amendment was made into eighth schedule to the Sales Tax Act 1990, which describes sales tax exemptions.

The previous government, in the Finance Act 2018, fixed 12 percent sales tax on all fuel supplies.

Now, the reduced rate is applicable to LNG/RLNG supplies to Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines (SNGPL). An official said the government procured LNG/RLNG through state-owned companies and supplied through the network of SSGC and SNGPL.

A private sector’s joint venture planned to set up merchant LNG terminal to handle the super cool gas as well as to directly procure it from foreign countries. The one-of-a-kind third LNG terminal – a joint venture of Shell, Engro, Gunvor and Fatima Group – is expected to start operation with 750 million metric cubic feet/day capacity by the 2nd quarter of 2020.

Import of LNG reached seven million tons a year since launch of the first terminal three years back.

RLNG share in power generation increased to 25.59 percent in July from 12.12 percent in the corresponding month a year earlier, while share of residual fuel oil decreased to 9.34 percent from 25.59 percent during the period, the Central Power Purchasing Agency’s data showed.

Currently, there are three RLNG-based power plants of 3,600 megawatts operating in the country. Demand for gas in fertiliser sector is also high with some fertiliser plants non-operational for the last one year due to gas shortage. This has resulted in increase in local demand and price of the urea and other fertilisers in the market, industrial officials said.

Currently, there are two LNG terminals operational at Port Qasim that handle imported LNG with a combine re-gasification capacity of approximately 1.2 billion cubic feet of gas per day (bcfd), but the current handling is less than one bcfd. The government planned to install more terminals with the private sector investment.

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