The Federal Board of Revenue has made it mandatory for the Compressed Natural Gas stations to stay registered with the sales tax department and file quarterly sales tax returns. The board has amended Sales Tax Special Procedures Rules, 2007 through a notification on Thursday.
According to the FBR, exemption from registration for CNG stations has been withdrawn. Now, CNG stations shall obtain registration, if not already registered, and shall also file return on quarterly basis.
Under the existing scheme, tax on CNG on behalf of CNG stations is paid by gas distribution companies ie Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL). Their supplies to CNG stations are charged at 24 percent of value instead of normal rate of 15 percent.
According to the amended rules, the CNG stations, if not already registered, shall obtain registration under Chapter I of the Sales Tax Rules, 2006, and shall also file quarterly sales tax return in the manner given in rule 7. The board had withdrawn a major budgetary decision (2007-2008) pertaining to de-registration of CNG stations with the sales tax department.
The FBR had issued instructions to the collectors of sales tax that the CNG stations should not be de-registered. These companies would continue to remain registered with the department and maintain record required under the Sales Tax Act, 1990.
The decision would be instrumental in proper monitoring of sales tax collection from the CNG stations and analysing whether the sales tax from this sector has reduced following implementation of the new system.
Under the new arrangement announced in budget 2007-2008, gas companies will charge sales tax @ 24 percent of the gas charges billed to the CNG stations. This 24 percent includes 15 percent normal sales tax presently being charged by gas companies plus 9 percent worked out on the basis of value addition by CNG stations.
The FBR data revealed that a substantial growth in CNG stations has recently been witnessed in Pakistan. The Oil and Gas Regulatory Authority (Ogra) has reportedly sanctioned more than 5000 CNG stations out of which about 1400 have started business.