A leading petroleum company has approached Federal Board of Revenue (FBR) to amend a budget notification applicable from July 1, 2017, to allow exemption from 'extra tax' on supplies of lubricating oil made by registered oil marketing companies (OMCs) to registered distributors and onward sale by such distributors to registered manufacturers.
Sources told Business Recorder here on Thursday that the leading petroleum company had referred to a recent amendment made in sub-rule (1) of Rule 58T of the Sales Tax Special Procedure Rules, 2007 vide SRO 583(1)/2017 dated July 1, 2017. The said SRO introduced a proviso in Rule 58T(1), whereby supplies of lubricating oils made to registered oil marketing companies (OMCs) and those made by OMCs to registered manufacturers for in-house consumption have been exempted from the levy of extra tax.
In this context, the company has requested the FBR that the exemption from levy of extra tax should be extended to supplies of lubricating oils being made by registered OMCs to registered distributors. However, the amendment introduced in Rule 58T(1) vide SRO 583(1)/2017, dated July 1, 2017, only provides exemption from levy of extra tax where the supplies of lubricating oils is made by registered OMCs to registered manufacturers. This amendment is discriminatory in a sense that the exemption applies to registered OMCs, which are in fact also distributors, whereas other registered distributors that are engaged by such OMCs for further distribution of lubricating oils to registered manufacturers are deprived of exemption from extra tax.
Based on the representation made by the company, it is anticipating the requested change in law. Also, in the salient features of the Federal Budget 2017, it was mentioned that exemption from extra tax on lubricating oil would be available to all industrial consumers purchasing lubricating oil from traders, and for which the entry relating to lubricating oil was proposed to be omitted from Chapter-XIII of the Sales Tax Special Procedure Rules, 2007.
Though the entry relating to extra tax on lubricating oil remained intact, only a proviso has been introduced in Rule 58T(1), providing exemptions from extra tax on supplies of lubricating oil made to registered manufacturers by the registered OMCs. Whereas such an exemption should have also been extended to supplies made to registered distributors and its onward sale by such distributors to registered manufacturers.
The FBR should reconsider the amendment in Rule 58T(1) introduced vide SRO 583(1)/2017, dated July 1, 2017, and put up the matter before the Ministry of Finance by recommending that exemption from levy of extra tax should also be available to supplies of lubricating oil made by registered OMCs to registered distributors and onward sale by such distributors to registered manufacturers. Based on aforesaid discussion, it is requested that a further proviso to Rule 58T(1) to the Sales Tax Special Procedure Rules, 2007 be inserted as under:
"Provided further that extra tax under this rule shall also not apply on supplies of lubricating oils made to registered distributors and on sale by such distributors to registered manufacturers for in-house consumption," the proposed amendment added.