However, Ogra has drawn the attention of FBR in its letter that supply of natural gas to CNG stations is subject to special rates of sales tax as provided under rule 20(2)C of the special procedure 2007. Therefore, in their opinion, CESS should not additionally be part of value of supply. Accordingly, now FBR has to clarify to the Ogra and Ministry of Petroleum and Natural Recourses about legal position of the applicability of 25 percent sales tax on Gas Infrastructure Development Cess on supply of natural gas to CNG stations.
The Ministry of Petroleum has sought a clarification on the application of 25 percent sales tax on Gas Infrastructure Development Cess under rule 20(2)(c) of the Sales Tax Special Procedure Rules, 2007. Under section 2(a) of the Gas Infrastructure Development Cess (GIDC) Act, 2011, the GIDC is chargeable from gas consumers, other than domestic sector consumers, over and above their fixed sale price and is also subject to sales tax in line with section 2(46) of the Sales Tax Act, 1990. It has further been clarified that since GIDC is over and above the gas sale price, 4 percent withholding tax applicable on gas consumption charges in case of CNG stations will not be applicable on GIDC.
Ogra is notifying maximum sale price of CNG under section 43B of the Ogra Ordinance, 2002, wherein GST @ 25 percent is being applied on the cost of gas supplied to CNG stations, in accordance with the rule 20(2)(c) of Sales Tax Special Procedures Rules, 2007.
In view of the definition of GIDC, as stipulated in GIDC Act, 2011 and the special tax collection procedure in vogue, it provides that GST is charged on the cost of gas of CNG stations. Therefore, GIDC shall also not be subject to GST. Accordingly, the prevailing maximum sale price of CNG notified by Ogra includes GST @ 25 percent of cost of gas and GIDC has been added as a fixed cost component. In view of this position, Ogra has requested the Ministry of Petroleum to confirm the treatment of GST on GIDC in terms of Sales Tax Special Procedure Rules 2007, sources added.
Details show that under the ST Special Rules, in case of supply of natural gas by a gas transmission and distribution company, the person responsible to charge, collect and deposit sales tax shall be the gas transmission and distribution sales tax company and the value for the purpose of tax shall be the total amount billed including price of natural gas, charges excluding the amount of late payment surcharge, rents, commissions and all duties and taxes, local, provincial and federal. Provided that in case of supply of natural gas to CNG stations, the gas transmission and distribution company shall charge sales tax at the rate of 25 percent of the value as aforesaid. This rate shall include 16 percent as chargeable on supply of gas company and nine percent in lieu of value addition made by CNG stations.
The Ministry of Petroleum has informed the FBR that the National Assembly approved the Gas Infrastructure Development Cess (GIDC) Act, 2011 on November 25, 2011 which received the assent of the President on December 13, 2011 and was published in the Gazette of Pakistan, Extraordinary, Part-I, dated December 15, 2011 as Act No XXI of 2011. In exercise of the power conferred by section 6 of the GIDC Act, 2011, the Federal Government (MPNR) is issuing GIDC notifications.
While responding to queries from gas companies, vide Petroleum Ministry's letter, the FBR had clarified that "Gas infrastructure development cess shall be included in the value of supply for collection of Sales Tax thereon in line with section 2(46) of the Sales Tax Act, 1990.
The Division VI-B of the First Schedule of the Income Tax Ordinance 2001 provides that "The rate of tax to be collected under section 234A in the case of a Compressed. Natural Gas station shall be four percent of the gas consumption charges". The section 2(a) of the Gas Infrastructure Development Cess Act, 2011 provides that "cess" means the gas infrastructure development cess chargeable from gas consumers other than domestic sector consumers of the company over and above the fixed sale price and payable under section 3.
Sources said that the GIDC is over and above the gas sale price and is therefore not included in gas consumption charges; hence 4 percent withholding tax in case of CNG consumers will not be applicable on GIDC. The Ogra, while referring to the said FBR clarifications and rule 20(2)(c) of the Sales Tax Special Procedure Rules, 2007 has sought further clarification with regard to application of 25percent GST on Gas Infrastructure Development Cess, Ministry of Petroleum added.
As per Petroleum Ministry, the companies have sought certain clarifications and also raised certain reservations regarding time and manner of payment of Cess. Accordingly, following clarifications are being issued: Industrial sector including captive power and fertiliser fuel stock: The GIDC of Rs 13 per MMBTU for industrial sector including captive power and fertiliser fuel stock is applicable with effective from January 2011.
Fertiliser Plants having fixed price contracts: The fertiliser plants having fixed price contracts means the fertiliser plants which made "new investment" under Fertiliser Policy, 2001 and their gas sale price is being determined under clause 2.1.2 of the said Policy which inter-alia provides as under:
"The price of feed gas will be the Middle Eastern Price prevailing on the date of signing of the GSA or $0. 77/MMBTU whichever is higher and shall remain fixed at such price till the expiry of 10 years from the date of commissioning". Accordingly, GIDC will not be applicable to the feed gas volume for which gas sale price of Rs 60.67 per MMBTU, as present, is applicable, sources added.