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Taxation, duties: PLPGMA seeks level-playing field for locally-produced LPG

LAHORE: Undue facilitation to the imports and ignorance to the local LPG marketing companies would put the ...

July 01, 2020

LAHORE: Undue facilitation to the imports and ignorance to the local LPG marketing companies would put the investment of billions and employment of thousands of people on stake, therefore, Ministry of Energy - Petroleum should not take any decision without taking stakeholders on board.

In a letter to the Ministry of Energy - Petroleum, chairman Pakistan LPG Marketers Association said a Committee constituted by the Cabinet Committee of Energy has called a meeting to discuss the measures to facilitate the import of LPG by both public and private sector companies.

These measures include complete elimination of GST on imports by Public Sector companies and reduction of GST from 10 percent to 2.5 percent on import made by the private sector, reduction of income tax on import of LPG by both public and private sector companies and elimination of tax on profit earned by all importers.

He said that no input or consultation have been sought from LPG marketing companies including the Pakistan LPG Marketers Association which is the registered trade body representing the interests of all OGRA licensed LPG marketing companies.

"There is already a discrepancy in taxation and duties applicable on locally produced LPG vs imports, where the former is subject to 17 percent GST and a petroleum levy of Rs 4669 per MT, whereas the latter enjoys a lower rate of GST at 10 percent and zero Regulatory Duty. This anomaly has also been highlighted by the Competition Commission of Pakistan in its recently published report on the LPG sector which states the advantage provided to importers distorts the price in their favor allowing them to sell the product at a higher price to match that of the locally produced LPG", he added.

PLPGMA chairman said the current LPG policy provides for state owned companies the first right over LPG produced by the public sector companies for specific use in LPG air mix plants.

However, to date only a meager quantity is being diverted to these air mix plants, while the remaining quantity is being sold by SSGC LPG and PSO directly to their distributors. An immediate audit inquiry therefore must be conducted to compare the actual product supplied to these companies vs that supplied to air mix plants.

He said in light of the above practices, there is no guarantee that imports made by public sector companies will be diverted to the less affluent areas of the country. In fact we believe that any advantage afforded to importers in the form of a reduced taxation will not be passed on to consumers, as LPG is sold at a uniform price at all retail outlets since there is no distinction between imports and local product.

He recommended that in order to improve the availability of LPG and make it affordable for the common man, serious efforts need to be made in identifying potential for enhancing local production of LPG and bringing it on stream immediately. This will save precious foreign exchange as well as provide a boost to economic activity in the country.

He said a level playing field in terms of taxation and duties must be provided to both imports as well as locally produced LPG; the latter is already subject to a payment of an upfront signature bonus to state owned companies. He said that any incentives provided to imported over locally produced LPG will be against the spirit of competitive practices and provide an unfair advantage to imports over local production.

Copyright Business Recorder, 2020