APCNGA rejects additional sales tax demand

KARACHI: The All Pakistan CNG Association (APCNGA) has rejected the recovery demand served by the Sui Southern Gas Company (SSGC) on CNG stations in the province for recovery of Rs4 billion.
Under pressure of the Federal Board of Revenue (FBR), the gas utility has advised the CNG stations in Sindh to deposit a cumulative of Rs4 billion. The amount was levied on CNG stations as additional sales tax for the period April 2014 to-date.
Shabbir Sulemanji, chairman of the APCNGA Sindh, in a press conference on Tuesday said that the government is overburdening the tax compliant sectors and this additional, as well as unjustified demand would result in closure of the industry.
Sulemanji said prior to 2008, the CNG industry was under the normal tax regime, whereas 17 percent general sales tax (GST) was charged in the bills on gas charges as was a common practice in all trades and businesses, including industries and manufacturing processes.
After 2008, the FBR imposed 26 percent GST on CNG, which was struck down by the Supreme Court of Pakistan in December 2013, declaring 26 percent GST on CNG stations as unconstitutional and the normal tax regime was restored.
On the directives of the Supreme Court, the gas bills were generated with 17 percent GST on gas charges up to March 2014. However, in late March 2014, the government introduced the Amended Section 3 (8) of the Sales Tax Act 1990 through an ordinance, he said.
"The new ordinance changed the basic principles of the Sales Tax Act 1990 through a wrong formulation that was not based on factual grounds and a unique tax mechanism was imposed on the CNG stations, resulting in an impact of 34 percent."
Sulemanji said that the industry stakeholders were never consulted before execution of the said ordinance, adding: "This additional tax will add a financial burden on the already paying taxpayers and would result in the closure of the CNG industry in Sindh."
Furthermore, no inputs paid in terms of sales tax on electric bills, lubricants, diesel, spare parts, plant and machinery are allowed for adjustment against the total output.
The APCNGA chairman said that the new ordinance would compel the CNG stations to charge sales tax on the total sales, as well as on other purchases, resulting in double taxation and a clear violation of the Section 7 (1) of the Sales Tax Act 1990.
"The CNG industry is already under crisis through issues mainly resulting from the distorted price breakup issued by the Ogra that is not provisioning the actual operating costs and is rather based on notional and hypothetical figures."
The All Pakistan CNG Association condemned the conspiracy to sabotage the CNG industry and appealed the government to immediately constitute a committee comprising tax experts and stakeholders of the CNG industry to resolve this issue. The APCNGA noted that if the issue was not resolved, all CNG stations in Sindh will shut down after 10 days.