Inter-city POL movement: Tola to submit report on mechanism for GST collection

Member Tax Reforms Commission (TRC) and leading Karachi-based Chartered Accountant, Ashfaq Tola has been assigned to submit a comprehensive report on equitable mechanism or formula for sales tax collection on the services of inter-city transportation of petroleum (POL) products.
Official sources told Business Recorder here on Wednesday that the decision has been taken in a meeting held at the Ministry of Petroleum & Natural Resources to resolve the issue between the Federal Board of Revenue (FBR) and provincial sales tax authorities regarding input tax adjustment on provincial sales tax on the services of inter-city transportation of POL products.
According to the official, after detailed deliberations it has been decided to assign the task to Ashfaq Tola, who is not only Member TRC but also an independent chartered accountant with ample knowledge of taxation. It has been further decided that Tola would devise the sales tax collection formula on the services of inter-city transportation of POL products and submit a detailed report within the next 2-3 weeks.
There is a likelihood that a hybrid formula may be chalked out to resolve the said issue by fixing some percentage for collection of sales tax on the basis of origin as well as destination. An equitable formula is needed for collection of sales tax on the said services. With the consent of all provinces, the mechanism would be finalised, sources said.
The official added that the federal and provincial laws are available for such purpose. The FBR and representatives of the provinces may provide necessary data to the said chartered accountant for compilation of the report by mid-January 2017.
During the meeting, Ministry of Petroleum & Natural Resources also took up the issue with the FBR to take measures for avoiding double taxation on services of inter-city transportation of POL products. When there is double taxation, the Tanker's Association went on strike which distributed the smooth supply chain of POL products across the country.
They added that the Petroleum Ministry is not opposing the taxes on POL supply, but its role is to facilitate the FBR as well as provincial authorities. During the meeting, three fundamental questions were raised ie sales tax on services of the said products be collected on the basis of origin or destination, tax collection be on reduced rate or value added tax (VAT) mode, and burden of this indirect tax on consumers, etc.
The representatives of the Oil Tankers Contractors Association (OTCA) Karachi talked about the practical problems in registration with the FBR as well as all provinces for sales tax purposes. The burden of registration should be put on the OTCA members due to technical and practical issues.
The meeting was attended by representatives of provinces, Oil Tankers Contractors Association (OTCA) Karachi, OGRA, FBR and other stakeholders. Background of the issue revealed that petroleum product pricing is a federal subject and prices are monitored and calculated by Oil & Gas Regulatory Authority (OGRA). Imposition of such taxes on product transportation may cause increase in prices, in case the input tax adjustment from FBR is not allowed, since petroleum products are already heavily taxed, Ministry of Petroleum is not in favour of impacting consumer prices. Moreover, the OGRA may also not allow any impact on consumer prices under the existing price mechanism duly approved by the Economic Co-ordination Committee of the Cabinet. The matter is likely to be more complicated if KPK and Balochistan governments also impose the said tax, leading to a multiplier impact on the end consumer prices.
The OTCA Karachi was of the view that mechanism of tax is still vague and requires proper statutory obligations by amending the relevant laws or by issuing specific notifications. They support FBR's point of view regarding clarification as to whether or not it is going to be part of price having impact on the general consumer. They are ready to pay tax but, in the first place, they want that mechanism needs to be devised in consultation with all provincial governments in order to adopt a uniform set of laws and equal rate of tax.