HSFO import: FY15 revenue collection shows Rs 20 billion shortfall

The revenue collection on the import of High Sulphur Furnace Oil (HSFO) has been estimated at Rs 22 billion during 2015-16 as compared to Rs 42.76 billion in 2014-15, reflecting a major shortfall of over Rs 20 billion. This has been estimated by Chief Collector of Customs Appraisement (South) Karachi in a communication to the FBR here on Monday.
According to the Chief Collector of Customs, the import of High Sulphur Furnace Oil (HSFO) (Pakistan Customs Tariff Heading 2710.1941), chargeable to sales tax @ 17 percent, is the major commodity which has been contributing up to 40 percent to the collection of sales tax at MCC (PMBQ) each month. Since November 2014, there has been a consistent and steep decline in international oil prices. The price of HSFO dropped from US $632 per MT (C&F) in July 2014 to US $278 per MT in August 2015; hence caused a substantial dip in sales tax collection and has affected collection on HSFO in July and August 2015 empirically. The situation aggravated as the quantity imported has also reduced during these two months. Accordingly, Rs 2327 million and Rs 1482 million have been collected daring July and August 2015 on HSFO vis-à-vis last year July and August collection of Rs 5660 and Rs 5653 millions, respectively. The MCC has also carried out a detailed position of quantity, value and Sales Tax collected on import of HSFO in July and August 2015 and compared the same with the corresponding period of last year.
The collectorate has conducted a detailed analysis with a view to project sales tax collection in FY 15-16. The issue was discussed with Pakistan State Oil (PSO), being the major importer of furnace oil also. It is expecting to import almost the same quantity of HSFO as per last year with minor variation of 5 percent. This point of view is supported by the data of last four years'''' import of HSFO. Moreover, the trend of decline in international prices of oil is likely to persist and it is projected that the sales tax collection at MCC (PMBQ) on import of Furnace Oil will register further decline, the Chief Collector said.
A data presenting projected sales tax collection on HSFO imports, in the FY 15-16 vis-à-vis FY 14-15 has been prepared by the Collectorate. The projection has been made keeping in view the current international oil price trend on last year''''s quantities imported. Evidently, sales tax collection on import of HSFO in the fiscal year 15-16 will not be more than Rs 22 billions as against the last year collection of Rs 42.76 billions.