ISLAMABAD: The government’s recommendations for tax reductions and exemptions on the import of liquefied petroleum gas (LPG) have been rebuffed by retailers and wholesalers.
The recommendations were put forth in a meeting chaired by the Secretary in-charge of Petroleum Division Asad Hayauddin and were attended by stakeholders from the private and the public sector, reports Dawn.
The LPG distributors had demanded the government to decrease taxes and bonuses levied on local LPG production.
The two sides met within a week despite having disagreements and both agree to submit detailed working papers in the forthcoming meeting to outline steps for decreasing prices of LNG.
Roughly 70 percent of LPG demand is met by local producers and the lion share of these supplies is procured from the public and private sector which includes PPL, OGDC, SSGC, SNGPL and Jamshoro Joint Venture Limited.
A rise of 21 percent in LPG prices has been witnessed since the Oil and Gas Regulatory Authority announced its official prices in February.
They have risen from Rs112,992 per tonne per 11 kg cylinder in February to Rs1,612-Rs132,732 per ton as of September 4th, increasing 21 percent.
Ogra determines prices of LPG under a formula notified by the government but end consumers are paying Rs1,700 per cylinder, which is higher than the official prices announced by Ogra.
SSGC submitted a working paper which was eventually shared by the government with the stakeholders during the meeting.
The working paper recommended a decrease in withholding tax from the present 5.5 percent to 2.5 percent adjustable in the income tax return.
Also, the working paper recommended removing the regulatory duty presently applicable at the rate of Rs4,699 per ton at import stage and only charge import levies on Saudi Aramco’s Contract Price (CP) instead of present practice of charging it on CP plus freight charges.
Furthermore, SSGC representative stated the measures recommended would decrease import cost by around Rs12,000 per ton or by 9 percent.
It recommended to also remove the 17 percent sales being levied at the import stage on the commodity.
This would result in the government suffering revenue losses to the tune of Rs6.7 billion if all the stakeholders reach a consensus over the recommendations put forth by SSGC.
To recoup these losses, SSGC proposed an increase in duty on the local production at the rate of about Rs8,000 per ton.
The SSGC recommendations were rejected by the LPG distributors who demanded action be taken in respect to the “unscrupulously high” signature bonuses on domestic production.
Moreover, the LPG producers said the government’s aim was to decrease domestic prices wouldn’t be successful with a one-sided action of import facilitation.
They expressed their annoyance over the recommended high taxes and levies on domestic production.
The local distributors stated it was discriminatory to permit domestic producers to seek international prices for local production and was unacceptable.
Moreover, in addition, they shared oil refineries, oilfields of public-sector companies and LPG extraction by JJVL were charging Rs77,000-80,000 per ton as signature bonuses, whilst their production cost wasn’t more than Rs25,000 per ton.