The Federal Board of Revenue (FBR) will chalk out a mechanism for recovery of general sales tax (GST) on the oil marketing companies (OMCs) and dealers' margins of certain petroleum products in order to implement the decision of the Economic Coordination Committee (ECC) of the Cabinet regarding deregulation of POL products.
Sources told Business Recorder Monday that the ECC has approved the deregulation of OMCs and dealers' margins on motor spirit in line with the deregulation of margins on HSD as already approved by ECC under its decision dated October 6, 2017 which was also conveyed to the FBR.
The ECC of the Cabinet vide its decision No 63/12/2018 dated 30th May 2018 has considered the Ministry of Energy (Petroleum Division) summary and approved the proposals. As per summary, ECC has approved the deregulation of OMCs and dealers margins on MS in line with the deregulation of margins on HSD.
However, the margins on HSD (diesel) could not be deregulated from October 6, 2017 due to non-formulation of GST recovery mechanism thereon by FBR. The ECC has now allowed deregulation of OMCs and dealers margins on MS (petrol) subject to the condition that FBR will develop a GST recovery mechanism on the OMCs and dealers margins of MS and HSD. Hence, till the formulation of GST recovery system, the OMCs and dealers margins will be revised based on the CPI.
Taking this into account, the FBR is requested to finalize and convey the GST recovery mechanism on the OMCs and dealers margins of MS and HSD in order to implement the ECC's decision.
The Economic Coordination Committee of the Cabinet considered the summary dated 30th May, 2018 submitted by the Petroleum Division regarding the review of the oil marketing companies (OMCs) and dealers' margins on petroleum products.
Details revealed that Petroleum Division proposes that the OMCs and dealers margins on MS (main grade of Petrol 92 RON) may also be deregulated in line with the deregulation of margins on HSD as approved by ECC under its decision dated 06.10.2017. However, the deregulation of margins on MS as well as on HSD shall be implemented after the GST recovery mechanism on deregulated margins is developed by the FBR.
In view of above, Petroleum Division proposes that the margins may be revised for OMCs and dealers on MS by Rs 0.09/liter and Rs 0.12/liter respectively based on CPI (for the period May 2017 - April 2018) while margins for OMCs and dealers on HSD be revised by Rs 0.23/liter and Rs 0.26/liter respectively based on CPI (for the period November 2015 - April 2018).
Background of the issue revealed that the ECC took decision dated 6th October, 2017 regarding review of the oil marketing companies (OMCs) and dealers margins on petroleum products. The margins of OMCs and dealers on MS will be revised based on CPI by Rs 0.14/liter and Rs 0.19/liter respectively with effect from 1st November 2017. The margins of OMCs and dealers on HSD will be de-regulated with effect from 1st December 2017 (other cost components included in its ex-depot sale price will be determined as per existing procedure). This is subject to the condition that the OMCs shall ensure maintenance of commercial stock/storage of petroleum products for at least 20 days.
The OMCs/dealers shall maintain online inventory system in a way to review/ monitor the same at respective OMC's oil depot. The OMCs will facilitate dealers in establishing uniform online inventory system within one year.
The OMCs shall add fuel marker in HSD within six months, at depot stage to avoid adulteration and bear its charges through their margins.
The OGRA would develop a mechanism to monitor the aforesaid OMCs commercial stock position, the dealers online inventory system and fuel marker system.
The ECC will review the impact of deregulation policy after three months in light of report to be submitted by the Petroleum Division.
In future, revision in MS margins would be considered if deemed appropriate in the circumstances.
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