According to the Petroleum Division, The Gas Infrastructure Development Cess (GIDC) Act, 2011 XXI) was initially passed by the National Assembly on 25th November, 2011 as a Money Bill pursuant to Article 73 of the constitution of Pakistan 1973. The main objective of levy of GIDC was to raise funds for development of infrastructure related to transnational gas pipelines and Liquefied Natural Gas (LNG) projects. The Act was challenged in various courts of law by the sectors which were being charged Cess. The courts initially issued stay orders and then the Act of 2011 was declared as ultra virus to the Constitution of Pakistan, 1973. The Federal Government filed an appeal in the Supreme Court of Pakistan which in its judgment dated 22.08.2014, held that the GIDC is a fee and it could not have been introduced through a money bill and the same was therefore not validly levied in accordance with the Constitution of Pakistan, 1973.
On September 24, 2014, the government promulgated the GIDC Ordinance, 2014 (Ordinance No. VI of 2014), however, this was also challenged in various courts of law. The government, with the approval of Parliament, in May, 2015 promulgated GIDC Act, 2015 (Act No. IV of 2015) after addressing the lacuna pointed out by the Supreme Court of Pakistan with specific reference to the laying of a bill under Article 70 of the Constitution of Pakistan 1973. Section 8 of the GIDC Act, 2015 provides validation of Cess levied, charged, collected or realized by the companies from various sectors under the GIDC, Act, 2011 and GIDC Ordinance, 2014. The consumers again challenged the GIDC Act, 2015 on various grounds and the courts again granted stay orders against billing as well as collection of Cess from consumers. Resultantly, the arrear amounts of GIDC are accruing.
The Senate while approving the GIDC, Bill 2015 constituted a special committee to monitor the implementation of GIDC Act 2015 and to make recommendations for removing anomalies. The Special Committee of the Senate in its final report recommended that CNG sector may pay a sum of Rs.12 billion as a full and final settlement with no interest or Late Payment Surcharge (LPS). Based on the recommendation, the GIDC Amendment Act, 2018 was placed before both the Houses and subsequently the GIDC Amendment Act, 2018 was approved by the Parliament in May, 2018. However the amendment was also challenged in various courts of Law by the CNG stations who did not want to pay the arrear amounts as well as those who could not avail this dispensation. The collection of GIDC was undertaken as C-Non-Tax Revenue Receipt and now it is being collected as 'B-Tax Revenue Receipt both ultimately forms part of the Federal Consolidated Fund Account and thus a part of the annual budget.
In pursuance of the meeting held on January 20, 2019 chaired by Finance Minister, Asad Umar, which was also attended by the Minister of State for Revenue, Chairman FBR and the officials of Finance and Petroleum Divisions, a summary on GIDC recovery of Cess arrears and revision in Cess rates was submitted to the Cabinet on January 23, 2019 for consideration in the meeting held on January 24, 2019
The proposal was as follows: (i) the fertilizer sector, IPPs/Gencos/KE and general industry, including its captive power units, may be provided a 50 percent waiver in GIDC payables for the period January 1, 2012 to December 31, 2018; (ii) effective January 1, 2019, GIDC rates for gas used as fertilizer feedstock (who are paying concessional feed gas price) will be reduced to zero and GIDC rate for their gas as fuel stock will reduced by 50%. Similarly GIDC rates for the gas used as fertilizer feed stock and fuel stock by old plants will be reduced by 50%; (iii) GIDC rates for IPPs/Gencos/KE, General Industry and its captive power units will be reduced by 50% effective from January 1, 2019; (iv) GIDC rates for zero-rated industry and its captive power units will be reduced to zero effective January 1, 2019 (this will require addition of a new category in the second schedule of the GIDC Act, 2015; (v) pursuant to the GIDC Amendment Act, 2018, CNG sector's arrears GIDC amount for the period January 01, 2012 to May, 2015 were settled at Rs.12 billion as a full and final liability. For the remaining stations which could not avail this scheme, they may be provided a one-time opportunely to deposit the balance amounts which are payable under the GIDC Amendment Act, 2018; (vi) on the analogy of the dispensation being provided to sectors as stated above, the CNG sector may also be offered the waiver of 50% GIDC payables for the period May, 2015 to December 31, 2018. The GIDC rate for the CNG sector may be reduced by 50% effective from January 1, 2019; and (vii) the effective date for levy of markup under Section 3 of the GIDC, Act, 2015 on the payable amounts may be taken as January 01, 2019.
After detailed discussion the federal cabinet held on January 24, 2019 approved the above proposals and further directed that: (i) reduction in Cess rate prospectively will be allowed to those consumers/sectors who will undertake to pay the balance 50% GIDC arrears; (ii) the consumers/sectors who have GST refund claims, subsidy claims or DLT claims can have option for non-cash settlement of the same with GIDC arrears; (iii) Ministry of Industries & Production will ensure that reduction in fertilizer prices due to levy of reduced Cess rate prospectively must pass-on the end consumer/farmers; and (iv) Gas Infrastructure Development Cess shall be used for the infrastructure development of gas projects as provided in Section 4 of Gas Infrastructure Development Cess Act, 2015.
