The Federal Board of Revenue (FBR) has assured All Pakistan Textile Mills Association (APTMA) that the government is considering relief for five leading export sectors, including speedy refund payments, no withholding tax on utilities (gas/electricity) and no sales tax on machinery/plants imports for brown/green field projects, to encourage new investment as well as expansion of existing projects.
Sources said that the issues of APTMA were discussed in detail during a meeting at the Finance Division which was attended by secretary petroleum and representatives of Power Division and FBR. The finance secretary chaired a meeting on the request of the APTMA. The FBR will resolve the tax-related issues of the textile sector and the said mentioned relief is under examination of the relevant government departments, sources said.
After detailed briefing by the APMTA on various issues being faced by the export and support industrial sector, it was assured by the chair that all possible steps will be taken expeditiously to address the issues highlighted by APTMA. The APTMA reciprocated by re-assuring their best cooperation and understating to make more investment in the sector and play their due role in economic development of the country.
During this last meeting, the finance secretary advised his team, Petroleum Division and FBR to review the issues discussed during the meeting in holistic manner and initiate necessary action agreed as follows:
The agenda item was that after federal budget 2019-20, 17 percent GST was imposed on utility bills of the industry effective from July 1, 2019. The SNGPL will charge GST at the notified tariff of RLNG. The SNGPL be directed to charge GST at the rate of US $6.5/mmbtu from previously five zero-rated sectors with clear billing mechanism for one year. In this regard, Petroleum Division in consultation with FBR and APTMA may consider approval of the competent forum, if so required.
The APTMA raised the issue that all connected relief with withdrawal of zero-rating SRO 1125 be extended to previously five zero-rated sectors ie no withholding tax on utilities ie gas and electricity for five previously zero-rated sectors and this has been repeatedly assured by the chairman FBR in the meetings.
The FBR informed the meeting that the issue is being actively considered and clarity in this regard will be provided shortly.
The next agenda item was the discounting of bonds (Promissory Notes) issued by the FBR. In this regard, Finance Division will take up the issue with State Bank of Pakistan (SBP) and necessary instructions/rules will be got issued in the foreseeable timeframe.
On the issue of refunds, the FBR had informed the meeting that new refund mechanism has been finalized. The finance secretary also referred that the issue is in active consideration and will be resolved soon.
The APTMA raised the issue of no sales tax on machinery/plants imports for brown field and green field projects to encourage new investment and expansion of capacities in existing projects. In this connection, the FBR will respond after consultation with the FBR chairman.
The APTMA raised the issue of sales to un-registered persons /CNIC request and clarification of "good faith" that onus is not of the seller. The issue discussed in detail and it was concluded that FBR will give more clarity on the application of the relevant SRO.
The FBR had clarified that that the amendment regarding provision of National Identity Card (CNIC) number at the time of purchases had been made in the Sales Tax Act, 1990 (Section 23) and not in any other taxation statute. This clearly means that this provision was only applicable if purchases were made from a sales tax registered person. In order to further safeguard businesses operating in a reasonable manner the law specifically provides that "if it is subsequently proved that CNIC provided by the purchaser was not correct, liability of loss or penalty shall not arise against the seller in case of sale made in good faith."
The meaning and operation of law with reference to the term good faith is well settled. However, in order to provide further assurance in this regard following policy guidelines are laid down.
No action under this provision will be undertaken without the approval of chief commissioner of the jurisdiction. Furthermore, where the incidence exceeds Rs 5 million, the action will require further approval of member operation or director general (export-oriented sector) or member (IR policy) as the case may be, the FBR added.
The APTMA had raised the issue of the notification to be issued by Ministry of Energy (Petroleum Division). In this regard, the government has allocated Rs 24 billion in federal budget (2019-20) to provide regionally competitive energy (gas) tariff to five previously zero-rated sectors.
The APTMA raised the issue that with effect from July 1, 2019, the government should immediately notify regionally competitive energy tariff ie US $6.5/mmbtu for 5 previously zero-rated sectors with clear billing mechanism for one year.
Petroleum Division informed that a summary is under submission to the ECC with proposal for clearance of subsidy claims of about Rs 5.7 billion relating to the past fiscal year and continuity of the same for the current fiscal year.
The FBR will also be consulted regarding status of zero-rated list in post-withdrawal of SRO 1125 scenario. The issue of notification for the current fiscal year is required to be considered by the Petroleum Division. The APTMA pointed out that the SNGPL has unjustly charged arrears on account of non-receipt of subsidy from the government from March onwards with LPS in June bills. The SNGPL should be directed to withdraw charge of LPS from consumers falling under previously five zero-rated sectors.
Petroleum Division may consider the issue and, if so desired, seek approval of the competent forum. In its meeting on August 8, 2019, the Economic Coordination Committee (ECC) of the Cabinet has approved procedure for payment of gas/RLNG supply claims of five export-oriented sectors and directed Sui Northern Gas Pipelines Limited (SNGPL) to raise verified claim within eight days of every month and asked Finance Division to release the subsidy amount within seven days after receiving claim from Petroleum Division.
A meeting of the ECC chaired by Advisor to Prime Minister on Finance Dr Abdul Hafeez Shaikh considered a summary regarding gas/RLNG supply to industrial sector, including exporters of five zero-rated sectors, in the light of ECC decision dated October 16, 2018 regarding supplying system gas/RLNG to export-oriented sector (formerly zero-rated sector) including its process units as well as captive power plants.
The ECC approved the subsidy claims for the month of March (based on 100% RLNG supply), April, May and June 2019 amounting to Rs 5,173,701,600 based on actual verified bills/claims of SNGPL for release-out of the budgeted allocation of current financial year for any shortfall in the budgeted allocation at subsequent stage through supplementary grant.
In order to further simplify the subsidy disbursement process, the ECC also approved a proposal for allowing SNGPL to raise verified subsidy bill/claim of preceding month by 8th day of every month and asked Finance Division to release the subsidy within seven (7) days of receipt of claim from Petroleum Division. Upon receipt of subsidy amount, the SNGPL would promptly issue adjusted invoices to export-oriented sector in the next bill cycle.
The ECC also approved the proposal for the export-oriented sector to pay the invoices at the ECC approved tariff of US $6.5 per MMBTU along with applicable taxes.
The meeting further approved waiver of interest/late payment surcharge (LPS) charged by SNGPL on the amounts over and above the tariff of $6.5 per MMBTU during the fiscal year 2018-19 which was due to delayed subsidy release by the government. For fiscal year 2019-20, LPS would only be charged on the delayed payment of US $ 6.5 per MMBTU and it will not be applicable on the subsidy amounts to be released by the government to SNGPL.
The ECC further directed the Ministries of Energy, Finance and Commerce and FBR to convene a meeting on the subject and resolve the issue regarding clarification of nomenclature of export-oriented sector so that benefits of concessional tariff be limited to exporters under previous notified zero-rated regime and to ensure that any exporter that was previously not beneficiary of concessional tariff would need certification of falling under the clarified regime from the FBR.
Comments
Comments are closed.