The Federal Board of Revenue has received six major proposals of the Ministry of Petroleum and Natural Resources on grant of sales tax and customs duty exemption on the gas import projects, duty-free import of plant/machinery/LNG terminals, etc, and deferment of application of duties and other levies till the commencement of commercial operations of the natural gas and Liquefied Natural Gas (LNG) import projects.
Sources told Business Recorder here on Monday that the FBR Chairman Salman Siddiq has received these proposals of the Petroleum Ministry for availing exemption of customs duty, sales tax and withholding tax for 'Gas import Projects' under different notifications issued by the FBR from time to time. In case exemptions of customs duty and sales tax have been granted under SRO.678(I)/2004, amendments would be made in the Customs SRO.678(I)/2004 which deals with exemptions to the Exploration and Production (E&P) Companies, their contractors, sub-contractors and service companies, LNG developers, other petroleum and public sector companies.
The FBR is reviewing the following six proposals of the Ministry of Petroleum for granting exemption of duties and taxes on 'Gas import Projects':
----- Firstly, exemption from sales tax/Federal Excise duty (FED) as laid down in SRO 678 (1)/2004, dated August 7, 2004 at import stage.
----- Secondly, exemption from sales tax for exploration and production companies (EPC) Contractors involved in the gas import projects.
----- Thirdly, the exemption from custom duties on HR Coils, Line pipe, Pylons/Piles to be included / added in clause -3 of the SRO 678 (1)/2004, dated August 7, 2004.
----- Fourthly, temporary importation of plant, equipment, machinery, LNG
----- Terminals and Peripheral Infrastructures etc to be allowed for the projects duty free on import cum export basis.
----- Fifthly, addition of natural gas infrastructure importers and its developers in clause 2-a, of the SRO 678 (1)/2004, dated 7-8-2004.
----- Sixthly, collection of applicable taxes, duties and any other levies may be deferred till the commencement of commercial operations of the natural gas and LNG import projects, on the analogy of such facility provided to Power Projects by ECC in July 2009, conveyed vide letter No F.1/12/2009-Com dated July 29, 2009.
Sources said that the Ministry of Petroleum and Natural Resources had moved a summary for the Economic Co-ordination Committee (ECC) of the Cabinet on exemption of taxes and duties for gas import pipeline and LNG projects. The ECC deferred consideration of the summary with the direction that the issues concerning exemption from taxes and duties may be resolved between the MP&NR, Revenue & Finance Divisions.
The Ministry has now prepared a revised summary for the ECC wherein tax exemptions and incentives for 'gas import projects' including LNG have been proposed. The FBR will submit its comments on the above mentioned proposals for inclusion in the revised summary to be submitted to the ECC.
Earlier, Ministry of Petroleum had sought approval of the Economic Co-ordination Committee (ECC) regarding tax and duties exemption in the following heads:
1. Exemption from income tax and other taxes on the Pakistan sourced income of foreign EPC contractors, material suppliers, design engineers and advisors/consultants etc involved in gas import projects.
2. Exemption from all import taxes and duties on the import of plant, equipment, machinery, material, pipes, pylons/ piles and operational vehicles etc for construction of gas pipelines and LNG Terminals.
3. Total exemption from Customs duty and Sales Tax for temporary importation of plant, equipment and machinery etc, which will be used for construction, operation and maintenance of gas pipelines, LNG Terminals and peripheral infrastructures.
4. Exemption from withholding tax on interest, payments, mark-up, fees, etc, arising from loans as well as dividend to shareholders of companies undertaking gas import projects.
5. Exemption from income tax and turnover tax on the revenues of natural gas importers and LNG sellers and terminal operators.
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