GIDC, levy, collection & recovery rules, 2019 await cabinet's nod

The federal government has framed Gas Infrastructure Development Cess (GIDC), levy, collection and recovery rules, 2019, to be implemented, after the approval from the federal cabinet, well informed sources told Business Recorder.

Natural gas has dominant role in the country's primary energy mix having a contribution of about 48 per cent. The shortfall/gap is widening mainly due to depletion of existing resources and increase in demand through adding new consumers.

To bridge the widening demand supply gap, a number of gas import projects are being pursued including Iran-Pakistan (IP) project; TAPI project; LNG import project and LPG supply enhancement projects in the public as well as private sectors.

However, to meet the financial requirements, neither GoP nor Sui companies have adequate funding to implement four projects and create the required infrastructure. Therefore, GoP decided to levy a cess through an Act of the Parliament in order to collect revenues for financing the gas transportation and ancillary support infrastructure.

Accordingly, GIDC Act, 2011 was enacted as Money Bill under Article 73 of the Constitution which was however challenged and declared ultra-vires to the Constitution by various High Courts.

The Supreme Court on August 22, 2014, while disposing off the appeal of Federal Government, upheld the decisions of the High Courts. Therefore, the Federal Government promulgated an Ordinance on September 24, 2014 which was subsequently enacted as GIDC Act (Act No-IV of 2015).

According to clause 6 of the Act, the Federal Government was mandated to promulgate rules for carrying out the purpose of the Act. Previously, the rules for utilization of the cess (GIDC utilization rules, 2015) were promulgated on March 18, 2016 through SRO 220(1)2016.

Petroleum Division argued that Supreme Court while granting leave to appeal in connected petitions on the ground has held that rules framed for the purpose of assessment and mechanism for collection of cess, have not been so far made. The Auditor General of Pakistan in its audit report of Audit Year 2016-17 also observed on the non-framing rules under GIDC Act, 2015.

Subsequently, GIDC Rules were drafted and sent to Law and Justice Division for vetting. The amendments made by the Law and Justice Division have been duly incorporated in the draft.

According to the draft notification, the cess shall be levied and charged by the federal government from the gas consumers, other than the domestic sector consumers, or the company at the rates as provided in the second schedule to the GIDC Act, 2015.

Every company will deposit in the government treasury, the amount of gas infrastructure development cess collected by it in respect of the sale during the calendar month with 15 days of the actual collection from consumers. The companies will submit it to the federal government within seven days of such deposit, a statement along with original treasury challans through which the deposit was made and such other particulars, if any, as the federal government may direct.

The draft notification further says that the arrear amount of cess which is due and payable by the gas companies shall be recovered along with mark up at the rate of four percent above three months Kibor which market will keep on accruing till such time the arrear amount is fully recovered.

Every company, shall, in respect of each calendar month, submit to the federal government before the close of the next month, a statement showing: (i) the quality of natural gas sold to various categories of consumers; (ii) GIDC accrued on the sale; and (iii) GIDC collected during the month.

Every company shall, within three months of the close of each fiscal year, submit to the federal government a consolidated annual return, certified by their auditors to be correct and true as per company's books, showing, in respect of each month of that year, the quantity of natural gas sold, the rate at which the cess has been calculated, the amount of cess accrued, collected and paid.