FBR incurs Rs6b annual losses in tax collection

KARACHI: The Federal Board of Revenue (FBR) has annually been incurring an estimated six billion rupees of losses for the last two years due to low tax payment from compressed natural gas (CNG) sector, officials said on Thursday.

Tax officials attributed the losses to a legal flaw surfaced following the deregulation of CNG sector in 2016.

They said retail price of CNG is still fixed at Rs67/kilogram for the purpose of sales tax collection from CNG stations despite that the actual price has been increased up to Rs103/kg.

The government deregulated the CNG prices on December 21, 2016 and allowed the concerned associations of CNG stations to determine retail prices of transport fuel.

Earlier, the prices were regulated by the Oil and Gas Regulatory Authority (Ogra) and the consumer price determined by the regulator was linked with sales tax collection from CNG stations. Sales tax was linked with Ogra rates on March 31, 2014 through an official order (statutory regulatory order 236(I)/2014).

The last value of sale price notified by the Ogra was Rs67/kilogram for CNG station, which remained applicable till the date of deregulation.

Sales tax loss is estimated between Rs400 to 500 million in a month.

Officials said the recent gas tariffs hike would further increase the losses in tax collection if the flaws are not removed.

Last month, the Economic Coordination Committee of the Cabinet approved increases to natural gas prices ranging from 10 to 143 percent. Rate hikes would be applicable to domestic consumers, commercial users, and the industrial, fertiliser, power, cement and CNG sectors.

The CNG sector pays sales tax of 17 percent on the difference in value of price received from gas utility and the sale price for consumers. Under the law, the gas utilities are required to collect sales tax on value-addition from CNG stations through monthly bills and also maintain the record of supplies to the outlets.

The FBR had asked the previous government several times to revise up the rate for tax collection, but it gave no attention to the issue.

The power of FBR to issue statutory regulatory orders for revising rates were withdrawn in the past and so the new rates would only be implemented through approval of the federal cabinet.

The officials said if the cabinet approves changes into retail price for the purpose of tax collection then the FBR would issue notices to Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited to collect outstanding amount from CNG stations.