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Tanker owners show flexibility to avoid oil supply disruption

Tanker owners show flexibility to avoid oil supply disruption

ISLAMABAD: The Oil Tankers Contractors Association (OTCA) on Monday allowed partial movement of oil products on a selective basis to avoid an immediate supply disruption and facilitate productive talks with the government.

Sources said the federal government has been making efforts to negotiate with OTCA members who not only observed a countrywide strike on Monday against ‘double general sales tax’ but also went incommunicado to avoid government pressure.

By Monday evening, senior officials of the petroleum ministry and oil marketing companies were able to reach the striking tanker owners. They persuaded them to at least allow partial oil movement within cities to improve atmosphere for talks and avoid a shortage-like situation.

The OTCA representatives also agreed to allow a specific number of trucks to move outside cities where the oil companies reported depleting product stocks. They were, however, perturbed about the non-seriousness shown by the government in resolving the issue.

The OTCA representatives complained that the tanker owners took up the issue with the government almost a year ago. The government side, which mostly consisted of officials working on deputation, always failed to follow up with provincial authorities, an official said. It was the fourth time that the OTCA gave a strike call in almost 10 months.

The government has called a meeting with the stakeholders of edible and petroleum oil industries on Tuesday to discuss the longstanding taxation issue, exposing the countrywide supply chain to the risk of disruption every three to six months.

The federal government swung into action on Friday when the OTCA office-bearers reported that some key cities had stocks of petroleum products for only four to six days and a strike could immediately break down the supply chain and cause public unrest.

The issue emerged following the imposition of general sales tax (GST) on services by the provinces without the input tax adjustment settlement at the federal level. The Sindh government was the first to bring oil tankers under the ambit of sales tax on services, followed by Punjab, Balochistan and Khyber Pakhtunkhwa.

The federal government previously engaged the four provincial chief secretaries, the federal finance secretary and the chairmen of the Federal Board of Revenue (FBR), OTCA, Oil Companies Advisory Council (OCAC) and Oil and Gas Regulatory Authority (Ogra), but the issue remained unresolved.

The provinces were, nevertheless, persuaded to keep postponing the collection of sales tax from oil tankers.

Worried that the tax liability could be claimed by the provincial tax authorities any time, the OTCA engaged independent consultant Ashfaq Tola. He reportedly advised the association that unless the issue was resolved through legal means, the tax authorities could raise invoices.

The provincial governments, particularly of Punjab and Sindh, and the FBR have paid little attention to a distribution formula for the sales tax collection at different places on various services. The provinces have levied sales tax on services of intercity transportation or carriage of goods by road or through pipeline or conduit.

The petroleum ministry, however, has little role in the matter, except that it is exposed to fuel supply disruptions as revenue matters have to be settled by the finance ministry and the FBR in consultation with the provincial governments, said a senior official of the ministry.

The critical point of dispute on sales tax on transportation/carriage services is between Punjab and Sindh. Punjab collects sales tax at the destination and Sindh at the origin for obvious reasons. But transporters end up paying the same tax at two different points. According to the OTCA, the tax liability amounted to 64 per cent, meaning Rs64,000 on an income of Rs100,000.

The stakeholders need to first agree on some middle point and then amend provincial sales tax laws passed by the provincial assemblies in June. To top it all, the federal government disallowed the input tax adjustment against provincial sales tax collection on various services through an amendment to its sales tax laws in June.

Published in Dawn, April 4th, 2017

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