ISLAMABAD: The Economic Coordi­nation Committee (ECC) of the Cabinet decided to impose 17 per cent general sales tax on Liquefied Natural Gas (LNG) and other imported gas and exempted the LNG terminal operator from income tax for five years.

The meeting, presided over by Finance Minister Ishaq Dar, also decided to tax floating storage and regasification unit (FSRU) to a five per cent import duty, allocated 325mmcfd LNG to independent power plants and allowed extension in deadline for export of 650,000 tonnes of sugar to July 15.

It also extended 20-year tax holiday to Gwadar Port for three more years to 23 years.

The ECC allocates 325mmcfd of LNG to IPPs which will be enhanced to 400mmcfd by the end of the year

On a proposal of the petroleum ministry regarding exemption of taxes and duties on gas import pipeline and LNG, the Federal Board of Revenue explained that all imported fuels were paying requisite taxes while locally produced natural gas was also subject to 17pc GST.

It was, therefore, decided that LNG and imported gas shall be treated like any other imported fuel and taxes as applicable shall be paid.

An official said the taxation policy was quite clear regarding taxation but since the LNG was a new commodity entering the country, it was required to be explicitly declared to be liable to 17pc GST.

It was also proposed that the government, vide its LNG policy, had given a five-year tax holiday to LNG terminal operators and owners under Section-113 and Section 113-C of the Income Tax Ordinance 2001. However, the FBR was of the view that tax holiday did not include Article 113 of the Income Tax Ordinance.

After detailed debate, the ECC decided that a tax holiday should be treated for terminal operators and owners and no tax should be levied.

Under another proposal regarding exemption of customs duty and sales tax on lease of FSRU, the petroleum ministry contended that FSRU was a new concept in Pakistan. It received, stored and regasified LNG for onward supply and as such it should be considered as plant and machinery of a floating LNG terminal.

The committee agreed with this point of view and advised the FBR to consider it as plant and machinery in the existing SRO, which meant FSRU to be subjected to 5pc customs duty.

On another summary on allocation, pricing of LNG and associated matters, the ECC decided that Ogra would determine the price of LNG on a monthly basis on the pattern of other petroleum products without going through the process of public hearing.

For this to materialise, Ogra rules would be amended.

The ECC also allocated 325mmcfd of LNG to IPPs which will be enhanced to 400mmcfd by the end of the year. The enhanced volumes would be allocated to Rousch Power after its ratification by the Cabinet committee on energy, led by the prime minister. The IPPs, to be provided LNG in the first phase, include Saif, Sapphire, Orient and Halmore, Kot Addu.

The ECC referred the matter regarding re-allocation of RLNG to Fauji Kabirwala Power Plant by equivalent reduction from Kapco, allocation to Rousch Power by allocation from Nandipur power plant, along with other issues concerning treatment of transportation charges as non-operating income for both the gas companies, to a committee, comprising secretaries of finance, petroleum and water and power, member gas of Ogra.

The committee would also suggest mechanism and required amendments and in case of disagreement, revert back to the ECC for adjudication.

The meeting also allowed extension in deadline for export of sugar (up to 650,000 MT) till July 15. The meeting was informed that the ECC had earlier approved for export of this quantity of sugar by May 15.

The ministry of commerce, however, reported that due to lengthy procedural requirement for export, contracts for 323,466 only tonnes could be registered till March 27.

The ministry further pleaded that apparently it would not be possible to export the remaining quantity by May 15.

Accordingly, the ECC allowed extension in the export period.

The ECC also allowed Fatima Fertiliser Company, Pakistan to undertake equity investment in fertiliser manufacturing plant in US, namely Midwest Fertiliser Corporation, through floating an international bond for $300 million.

On a proposal from the Ministry of Water and Power, the ECC allowed NTDC to carry out tariff adjustment for 10.5MW Davis Energen Ltd as admissible under Power Purchase Agreement.

On a proposal from the Ministry of Ports and Shipping, tax holiday period for Gwadar Port and the Gwadar Port free zone was extended from 20 to 23 years as requested by China Overseas Port Compnay Ltd (COPC) to attract national and foreign investors and to enhance the overall FDI through Gwadar Port Authority.

Published in Dawn, April 10th, 2015

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