ISLAMABAD-An Association representing oil marketing companies (OMCs) has claimed that the 1.25 percent Infrastructure Cess Tax imposed by the Sindh government on the imports will ruin the oil sector, as the body has sought the Ogra interference and argued that the incorporation of any new component necessitates its inclusion in the pricing formula of petroleum products.
In accordance with the Sindh Government Infrastructure Cess Tax, a levy of I.25% will be imposed on all imports made through Karachi Port, which holds significant magnitude and carries the potential to directly impact the profit margins of OMCs by nearly 40% in the event that the Cess Tax is enforced, Oil Marketing Association of Pakistan (OMAP) said in a letter written to Chairman Ogra.
It is worth noting that all OMCs have obtained stay orders from both the Sindh High Court and the Supreme Court of Pakistan, which mandate that the release of products is contingent upon the provision of bank guarantees equal to the amount of Cess Tax. Furthermore, the requirement to furnish bank guarantees for the tax will also pose challenges for the OMCs as it will affect their working capital, the letter said.
The Oil Marketing Association of Pakistan (OMAP) aims to draw your esteemed attention to the pressing concerns confronting all oil marketing companies (OMCs) subsequent to the introduction of the WEBOC system for Customs clearance. Of utmost importance is the matter pertaining to the imposition of the Sindh Government Infrastructure Cess Tax.
Due to the regulated formula governing the determination of prices for diesel, gasoline, and other products, the incorporation of any new component necessitates its inclusion in the pricing formula. Given the utmost importance of this matter, which further compounds the challenges faced by the struggling oil industry, we kindly request your prompt arrangement of an urgent meeting with OMAP to address this issue as a matter of utmost priority.
We aim to clearly convey that this matter holds significant importance and raises serious concerns for the OMCs. As a regulatory body, OGRA should promptly assume its positive role in resolving this matter without any delay, as any delay would prove detrimental to the OMCs. In the event of such a delay, OGRA would bear full responsibility for the resulting adverse circumstances. The letter further said that OMCs are already burdened with the heavy costs stemming from non-industry friendly policies imposed by OGRA, despite our repeated warnings and requests. Any further delay in addressing this issue will lead to additional ruin for the petroleum industry.
However, Spokesman Ogra has clarified that additional tax/cess implementation has nothing to do with OGRA, CESS is a taxation matter of a provincial government on the goods entering in the province. OMAP may approach relevant government forums in this regard. However the same is being sent to federal govt for information & review, the spokesman added.