Fertilizer sector: Government links settlement of GIDC on forensic audit of GIDC collection

The Federal Government has reportedly linked settlement of Gas Infrastructure Development Cess (GIDC) with fertilizer sector on forensic audit of GIDC collection made under the end product cost structure of the sector, sources close to Secretary Industries and Production told Business Recorder. The Federal Cabinet in its meeting held on January 24, 2019 while considering a summary submitted by the Petroleum Division on "Gas Infrastructure Development Cess Act Recovery of cess arrears and revision of cess rates" approved the proposal for amending the GIDC Act, 2015 and referred the matter to the Law and Justice Division in terms of Rule 27 of the Rules of Business, 1973 for drafting the amendment accordingly.
The Cabinet further decided that: (i) reduction in cess rate prospectively will be allowed to those consumers/sectors who will undertake to pay the balance 50 per cent GIDC arrears; (ii) the consumer/sectors who have GST refund claims, subsidy claims or DLTL claims can have options for non-cash settlement with GIDC arrears; (iii) Ministry of Industries and Production will ensure that reduction in fertilizer prices due to levy of reduced cess rate prospectively must pass-on to the end consumer/farmers; and (iv) gas infrastructure development cess shall be used for the infrastructure development of gas projects as provided in section 4 of the GIDC Act, 2015.
The Cabinet Division on February 20, 2019 conveyed amendment in sub para (i) of the decision which says that "reduction in cess rate prospectively wile be allowed to those consumers/sectors who will pay the balance 50 percent GIDC arrears. The reduced rate will apply from the date of payment of arrears is made."
Based on the approval of the Cabinet for amending the GIDC Act, 2015, Petroleum Division submitted the draft GIDC amendment Act, 2019 to the Law Division which on April 15, 2019 vetted the draft GIDC amendment Act, 2019. The amendment then was placed before the Cabinet Committee on Legislative Cases (CCLC) on May 30, 2019. The CCLC in its meeting led on June 19, 2019 considered the summary and approved the proposal. Subsequently, the decision of the CCLC was ratified by the Federal Cabinet on June 24, 2019.
Meanwhile, Petroleum Division received the following direction from the Prime Minister's office with respect to GIDC Amendment Bill, 2019 on July 4, 2019 "decision of the Cabinet regarding 50 per cent reduction in GIDC is to be implemented through Ordinance. Law Division to complete its review of draft law by July 4, 2019."
In compliance with the Prime Minister Office directive, a copy of the GIDC Amendment Act, 2019 as approved by CCLC and ratified by the Federal Cabinet was forwarded to the Law and Justice Division for taking further necessary action in terms of Rule 30(1) of the Rules of Business, 1973. The Law and Justice Division accordingly prepared the GIDC Amendment, Ordinance, 2019.
It was also apprised that while moving the case for promulgation of the GIDC (amendment) Ordinance, 2019 as prepared by Law Division in the light of CCLC approved GIDC (amendment), Act, 2019 some typographical errors have been noted which need correction prior to promulgation of the Ordinance.
The existing provision- provided that reduction in rate of cess as specified in sub-sections (6) and (7) shall be prospective for those for consumers which pay the balance of fifty percent of outstanding cess as provided in sub-sections(4) and (5) and shall withdraw cases filed against the Federation of Pakistan. The reduced rate of cess shall be applicable from the date of payment of arrears and withdrawal of litigation.
The correction provision is as follows "provided that reduction in rate of cess as specified shall be prospective for those sectors or consumers which pay the balance of fifty percent of outstanding cess as provided in sub-sections (5) and (6) and shall withdraw cases filed against the Federation of Pakistan. The reduced rate of cess shall be applicable from the date of payment of arrears and withdrawal of litigation.
On July 9, the Cabinet considered the summary submitted by the Petroleum Division for draft GIDC Amendment Act, 2019 and approved the amendment recommended by the Petroleum Division. The settlement under the agreement proposed in the Ordinance, pertaining to the fertilizer sector, will be subject to forensic audit of GIDC collections made under the end product cost structure of that sector.