KARACHI: Pakistan State Oil (PSO) has paid Rs581 million to the Customs authorities as 17 percent sales tax imposed on the import of liquefied natural gas (LNG) as the Customs value at $461 per metric ton was determined for the subject consignment by Customs.
The Economic Coordination Committee (ECC) of the Cabinet approved 17 percent general sales tax on Liquefied Natural Gas (LNG) and other imported gas.
It was learnt that PSO had filed the Goods Declaration (GD) for the said consignment of 68,000 metric tons, declaring the value of the commodity at $421 / metric ton. However, the Customs have provisionally calculated $40 per metric ton, which would be finalized by the Ministry of Commerce.
The values were determined in exercise of Section 81 of the Customs Act and CnF value was converted into FoB to avoid confusion regarding calculation of freight.
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.
Confusion persists over the LNG deal with Qatar as the government has not yet disclosed the price of the gas. Under the $22 billion reported deal, Qatar agreed to supply 500 million cubic feet of LNG per day for 15 years. However, there was no official word on the LNG deal and details about the cost and sale price. The need to import LNG is a result of the gas shortage and relatively higher cost of power generation through furnace oil and diesel fuel.
Shahid Khaqan Abbasi, Petroleum Minister, said the negotiated price was $8 per unit and the final purchaser was the fertilizer and the CNG sectors. However, he has admitted on television that the price was negotiated by the Pakistan government and added that the government has not yet inked a deal with Qatar for subsequent imports. Fair enough, however, credible reports indicate that the government has now agreed to sell the entire cargo to M/s Pak Arab Fertilizer at a price of 10.90 dollars per mmbtu. Two obvious questions are: who but the buyer is in a position to change the final purchasers after the cargo has arrived at the port; and secondly, the 2.90 dollar per mmbtu added on is a charge of nearly 36 percent on the actual purchase price, which appears to be exorbitant. Is the charge for the use of the dedicated port and for the use of the pipeline and if so is this for all times to come or whether once the cost of the terminal/pipeline has been met the charge would be reduced substantially? These questions require an answer.
The minister is on record as having stated that he is unable to reveal the actual price of the LNG that is being negotiated as no deal is made public until and unless it is inked – a requirement of all LNG-related government-to-government deals. And yet, as noted above, he has announced that 8 dollars per mmbtu has been agreed. He is also on record as having stated that the government is attempting to modify the public procurement rules to enable the government-to-government LNG deal, however, this statement too has generated controversy given that flouting PPRA rules generates the perception that all is not above board.
And finally, Sindh government has expressed serious concerns about the LNG import deal, irrespective of whether it is yet to be signed, and has requested convening of the Council of Common Interests (CCI) meeting to discuss them. Abbasi unambiguously stated that the subject is one of fuel imports and therefore the federal government is fully empowered to take any decision it deems appropriate and the subject is not within the realm of the CCI. Such an attitude militates against the government’s oft-repeated claim that it takes all stakeholders on board with its decisions and perhaps a more democratically mature way would have been to announce a tolling charge between the two networks namely the SNGPL and SSGCL which would have eased Sindh’s concerns.