ISLAMABAD: The government is likely to impose standard rate of 17 percent sales tax on Liquified Petroleum Gas (LPG) imports and its local supplies from July 1, 2021. According to the comments of renowned tax expert Ashfaq Tola on the proposed Finance Bill 2021, the amendment in the Sales Tax Act, 1990 has been proposed. Finance Bill proposes to omit LPG (Tariff Heading 2711.1910) imports thereof and local supplies of such imported LPG chargeable @10% from serial 58 of Eight Schedule whereby it will be chargeable @17%.

The Bill proposes to omit following Clauses pertaining to the oil and gas sector. Presently, any income of persons whose profits or gains from business are computed under the Fifth Schedule to Income Tax Ordinance as is derived from letting out to other similar persons any pipeline for the purpose of carriage of petroleum shall be charged to tax at the same rate as is applicable to such persons in accordance with the provisions of the said Schedule. Now, profits from such shall be chargeable to tax at normal rates provided in First Schedule.

The tax in respect of income from services rendered outside Pakistan and construction contracts executed outside Pakistan are charged at the rates as specified in sub-clause (b), provided that receipts from services and income from contracts are brought into Pakistan in foreign exchange through normal banking channel. The rates in respect of income from services rendered outside Pakistan shall be 50% of the rates as specified in clause (2) of Division III of Part III of the First Schedule and the rates in respect of contracts executed outside Pakistan shall be 50% of the rates as specified in clause (3) of Division III of

Part III of the First Schedule. Now tax will be charged at normal rates as provided in First Schedule, Ashfaq Tola added. As per 3rd Schedule the depreciation rates in case of mineral oil concerns the income of which is liable to be computed in accordance with the rules in Part-I of the Fifth Schedule for below ground installations was 100% is now proposed to be omitted. Now the rates for below ground installations will be same as for offshore platform and production installations i.e. 20%.

The Bill proposes to withdraw following concessions provided to oil and gas sector under fifth Schedule: Rule 2(7) Part I: Sub rule (6) provides that excess deductions allowable from profits are only allowed to be carried forward for six years. Sub rule (7) provides concessions of such limitation of 6 years in case of any machinery, plant or other equipment used in exploration or production. However, such concession is not allowed in case of other deductions. The bill proposes to withdraw such concession.

Rule 3 Part I: Rule 3 provides for depletion allowance equal to fifteen per cent of the gross receipts representing the well-head value of the production. The bill proposes to withdraw such depletion allowance. Rule 4 provides for exemption of profits and gains up to 10% of capital employed in case of an undertaking involved in exploration and extraction of mineral deposits and is also engaged in the business of refining or concentrating in Pakistan. The bill proposes to withdraw the exemption, Ashfaq Tola added.

Copyright Business Recorder, 2021