The companies engaged in business of oil and lubricants as distributors have contested the SRO 98(1)/2013, which made withholding sales tax provisions applicable to all the companies. Sources told Business Recorder here on Friday that the SRO 98(1)/2013 dated February 14, 2013 had made amendments to Sales Tax Special Procedure (Withholding) Rules, 2007 making withholding sales tax provisions applicable to all companies.
Most of the oil distribution companies buy oil and lubricant from oil marketing companies and sell it to the companies in local market. The oil products especially diesel, petrol and furnace oil being fast moving have very limited value addition. According to the withholding rate prescribed under Sales Tax Special Procedure (Withholding) Rules, 2007, our (oil distribution companies) purchaser has to withhold 3.20 percent of our payments, whereas our value addition revolves around 1 percent only. The oil distribution companies have asked the FBR to amend the Rule 5(iii) of the Sales Tax Special Procedure (Withholding) Rules, 2007 which may be read as:
"(iii) Petroleum Products" or "...oil refineries, oil marketing companies and their distributors". According to Withholding Sales Tax provisions applicable at present, Rule 5 (iii) is as under: "(iii) Petroleum products as supplied by petroleum production and exploration companies, oil refineries and oil marketing companies".
In case the said amendment is not made, companies doing business of oil and lubricants as distributors will be forced to close down their business as all the companies will prefer to go directly to Oil Marketing Companies rather than paying such higher prices to the distributors causing unemployment and loss of revenue to the government, which obviously is contrary to the spirit of the amendment.
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