Import of CNG Compressors: KCCI recommends waiver of five percent duty

The Karachi Chamber of Commerce and Industry (KCCI) has recommended to the Federal Board of Revenue (FBR) to waive the existing 5 percent custom duty on the import of the CNG Compressor. The chamber further recommended that no other taxes be levied on the said import. The CNG sector penetrated its roots in Pakistan since late 1980s and today Pakistanis are the largest users of CNG in the world.
There are more than 3000 CNG stations operating in Pakistan and it is pertinent to mention that most of the CNG compressors installed have completed their life thus requires a replacement to cater the ongoing need and growing demand due to an exorbitant increase in the international oil prices.
Further, many CNG stations are running on single compressors creating hardships for the public during breakdowns, thus the need of installing an additional Compressor on the existing station is vital to provide uninterrupted services to the Public.
The chamber pointed out that there is already an embargo on the issuance of the new CNG licenses but to improve the infrastructure of the existing CNG Stations import of compressors be encouraged without any duty or levy of taxes.
President KCCI Mohammad Saeed Shafiq noted that under FTR the CNG station at present pays an exorbitant rate of 26 percent General Sales Tax (GST) as full and final sales tax liability directly deducted at source from the gas bills issued by the gas marketing companies.
However, after deduction of the said tax under FTR the CNG stations are also paying sales tax in the electric bills and also on the purchases of lubricants, spare parts, etc. To avoid double taxation and hardship to the taxpayers the required change would bring legitimacy as per the rules and policies of FBR. Further, the taxpayers will develop trust and confidence in FBR and would broaden the tax culture in Pakistan.
He proposed that CNG sector be allowed to claim refund of the GST paid on electric bills and on purchases of products like diesel, lubricants, spare parts etc. It is further suggested that if possible an exemption certificate be issued to the CNG stakeholders for GST on any purchases. Further, no audit should be conducted for CNG Stations as they fall under FTR.
Proper legitimacy of tax collection would always increase the revenue and encourage more taxpayers to get into the tax net. The president noted that under section 234A(1) of the Income Tax Ordinance, 2001 relating consumption of the gas from the CNG station is the final tax liability in pursuance of sub section 3 of the said section. However, sub section (4) of section 234 A stipulates that a tax payers shall not be entitled to claim any adjustment of withholding tax collected or deducted under any other head during the tax year.
The FBR has applauded the efforts and contribution of the CNG sector towards national exchequer, CNG sector has to pay many other taxes by way of withholding that tantamount to double taxation and burden on existing taxpayers.
He said that as decided in the detailed meeting held with FBR, we strongly propose to delete the sub section (4) of section 234 A and since CNG station falls under FTR, to avoid double taxation exemption of With holding tax deducted in the electric bills may immediately be implemented in this coming Budget. Further, as already discussed in depth with FBR no audit should be conducted for CNG Stations under FTR. He said that double taxation and hardship to the taxpayers of CNG sector to be avoided as they are heavily contributing to the national exchequer.