Taxation

Provincial sales tax: MoP&NR convenes meeting today to resolve issue

The federal government has convened an emergency meeting of all petroleum industry stakeholders on Tuesday (today) to resolve the issue of newly imposition of provincial sales tax on the services of inter-city transportation of POL products, which threatens to disrupt the supply of oil across the country. The meeting was scheduled after the Oil Tankers Contractors Association (OTCA) stated that it would go on a strike because of the double taxation they are facing.

The Ministry of Petroleum and Natural Resources (MoP&NR) convened the meeting which will be presided over by additional secretary, Ministry of Petroleum. Provincial chief secretaries, secretary finance, managing director Pakistan State Oil (PSO), chairman Federal Board of Revenue (FBR), and representatives of OTCA, Oil Companies Advisory Council (OCAC) and Oil and Gas Regulatory Authority (OGRA) will take part in the meeting.

The OTCA announced last week to go on a strike to protest against the levy of sales tax on services by the provincial authorities. However, they called it off till Monday when the Ministry of Petroleum and Natural Resources reassured the body that it would help resolve this problem.

The OTCA office-bearers stated that a few key cities of the country have stock of petroleum products that would last only for four to six days. Thus, a strike would have immediate effect in breaking down the supply chain and causing public unrest. It was the Sindh government which first brought oil tankers under the scope of sales tax on services followed by the rest of the provinces.

This is the fourth time a strike has been threatened by the OTCA on this particular subject in approximately 10 months. The strike calls had always been put off after reassurances from the ministry that their concerns would be addressed. The provincial government issued necessary notifications to hold in abeyance the applicability of sales tax on transportation services on March 31, 2017. After a consultative meeting between additional secretary, Ministry of Petroleum and Natural Resources and the FBR, the notifications for applicability of sales tax on transportation services had been issued.

The aim of the whole exercise was to finalise an equitable mechanism or formula for sales tax collection on the services of inter-city transportation of POL products. The issue was resolved between the FBR and provincial sales tax authorities regarding input tax adjustment on provincial sales tax on the services of inter-city transportation of POL products.

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