The gas companies have requested the Federal Board of Revenue (FBR) for reduction in sales tax on supply of gas at the input stage in budget (2011-2012) because their output is less than the input, which result in accumulation of refund.
It is learnt here on Wednesday that the gas companies have requested that the sales tax at input stage be reduced so that their input matches with the output which is less in quantum due to supplies of gas made to zero-rated sectors.
Earlier, it resulted into refund situation which creates complications. Therefore, reduction in input would at par with the output which will ease out the situation for the gas companies and also for the FBR who has to ultimately refund the excess amount paid in shape of input.
According to the FBR budget proposal drafted for fiscal (2011-2012), due to regulation of consumer prices of natural gas, the gas distribution companies have to pay more input tax to exploration and production (E&P) companies than the amount of output tax charged on the supply of natural gas to the consumers. Besides, due to zero-rated supplies to various sectors, these companies cannot collect any output tax from their several registered industrial buyers. Resultantly, huge volume of refunds is accruing. The gas distribution companies have suggested that the rate of sales tax on their purchases from E&P companies be fixed on lower side (i.e. 10pc). Since a proposal for levying upfront tax @ 8% on gas supplies to unregistered sector is in pipeline, reduction on sale tax rate to 121/2 pc is proposed for natural gas purchased by gas distribution companies from E&P companies, FBR proposal added.
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