Govt agrees to cut turnover tax down to 0.5pc for OMCs

KARACHI: Government has agreed to bring down the turnover tax on oil marketing companies (OMCs) from 0.75 percent to 0.50 percent, The News learnt on Monday.

Federal government did not reduce the turnover tax in the budget presented last week, despite the assurances to the OMCs upon their repeated demands. Finance Minister Miftah Ismail agreed to reduce the turnover tax from 0.75 percent to 0.50 percent when a delegation of representatives of oil sector companies met him in Islamabad and apprised him about the reservations of the OMCs for not being accommodated in the federal budget viz-a-viz the turnover tax, sources privy to the development disclosed.

The delegation told the minister that despite the assurances on part of government, the reduction in the turnover tax for the OMCs has not been made, at which he immediately directed Federal Board of Revenue (FBR) to look into the issue.

Sources said that the minister also assured to look into the custom duty on crude oil, which would also be addressed. Sources said that refineries were already paid 0.50 percent turnover tax whereas OMCs were subjected to pay 0.75 turnover tax, which used to be one percent some years back.

Turnover tax is applied on the total revenue irrespective of profit or loss of a company. Currently, turnover tax was being levied on the OMCs at the rate of 0.75 percent as the “minimum tax” under Section 113 of the Income Tax Ordinance 2001.

Before the presentation of the budget, State Minister for Petroleum Dr Mussadik Malik had assured the oil sector of reducing the turnover tax. At the end of May this year, Oil Companies Advisory Council (OCAC) forwarded a letter to the government raising the issue of turnover tax of 0.75 percent, arguing its imposition at the current level of petroleum prices was unsustainable for the industry.

The oil sector people believed that reduction in the turnover tax would provide some relief to the oil sector, which was facing liquidity problems due to the rising prices of the petroleum products in the global market and had to sell on lower rates in the domestic market by claiming the price difference on fortnightly basis.

Sources said that the oil sector was feeling dejected after witnessing no progress on turnover tax in the federal budget; however, the latest agreement by finance minister would help the sector in a big way. —