Sources told Business Recorder here on Thursday that an effective sales tax mechanism for freight services by oil transporters (petroleum products transported through road only) has now resolved dispute between the federation and provinces. In this regard, provinces have agreed on a uniform rate of 15% sales tax on inter-province oil movement.
Sources said that all provincial tax authorities will also jointly address concerns and amend their rules/legislation relating to input/output tax adjustment by September 30, 2017.
A meeting on the matter was held under the chairmanship of additional secretary, Petroleum Division, Ministry of Energy, with the representatives of Oil Tanker Contractors Association (OTCA), Punjab Revenue Authority, Sindh Revenue Board, Khyber Pakhtunkhwa Revenue Authority, Balochistan Revenue Authority, FBR, OGRA and Ministry of Finance to resolve the long outstanding issue of sales tax imposed by provinces on oil tankers.
The additional secretary, Petroleum Division, appreciated that a consensus has been developed among all provincial tax authorities on distribution formula; therefore, the matter has reached towards the resolution.
The provincial tax authorities stated that they have agreed on distribution formula (50% at origination and 50% at termination) and uniform rate of 15% of subject tax on inter-province oil movement.
Moreover, the provincial tax authorities were of the view that there is no point of conflict on the subject tax with regard to intra-province oil movement.
Therefore, the subject tax will be paid by Oil Tankers Contractors Association (OTCA) through oil marketing companies (OMCs). They also informed that unregistered oil contractors will get registered through National Tax Numbers (NTNs) and respective OMCs will act on their behalf as withholding tax agents for the collection of sales tax under value-added tax (VAT) system while the sales tax registered contractors may deposit sales tax directly.
Oil Tankers Contractors Association (OTCA) has shown its minor concerns over input and output tax adjustment and its registration in case of direct or withholding sales taxpayer.
PSO was of the view that an MoU agreed between provincial authorities and FBR on input and output sales tax adjustment requires to be legislated to avoid legal complications in future.
OCAC has argued that OMCs have different tax filing modules (SAB, ORACLE, etc); therefore, prior to implement the proposed sales system, the tax authorities should make sure that at the time of making freight payments by OMCs to contractors and withholding proposed sales tax (50:50)
thereon, the OMCs existing modules have the capability to give desired results promptly.
The viewpoint of all stakeholders was heard during the meeting in detail and after thorough discussions the following was mutually agreed:
Firstly, all four provincial governments will issue necessary notifications for extending the applicability of subject sales tax till December 31, 2017 as early as possible.
Secondly, all provincial tax authorities will jointly address above concerns and amend their rules/legislation relating to input/output tax adjustment in case of direct as well as withholding tax payer by 30th September, 2017. The proposed amendments would be shared with OTCA.
Thereafter, a meeting would be held between provincial tax authorities and OTCA within 07 days at Karachi to finalize the requisite amendments in the relevant rules/legislation.
It was agreed that the subject tax on intra-provincial/inter-provincial oil movement will be collected from the date when requisite modalities/rules on the subject tax will be finalized between OTCA and provincial tax authorities, sources added.
Copyright Business Recorder, 2017