The government may introduce a new tax regime for the Compressed Natural Gas (CNG) stations in the upcoming budget, replacing the existing sales tax/income collection mechanism due to poor collection from this potential sector.
It was learnt on Thursday that the budget-makers are examining proposal to rationalise tax rates for the CNG stations in budget 2008-2009. A new system might be in place for proper collection of taxes from these stations. The CNG stations have enjoyed concessionary regime for the last one year, but failed to deposit the due amount of taxes. In case government reverts to normal tax regime, this might result in increase of CNG prices in future.
The board had made it mandatory for the CNG stations to remain registered with the sales tax department and file quarterly sales tax returns. The exemption from registration for CNG stations was granted in budget 2007-2008 which was later withdrawn.
Under the existing scheme, tax on CNG on behalf of CNG stations is paid by gas distribution companies ie Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL). Their supplies to CNG stations are charged at 24 percent of value instead of normal rate of 15 percent.
It is worth mentioning that the board had collected a meager amount of Rs 124 million withholding tax from CNG stations during July-March 2007-2008 against annual projection of Rs 700 million, reflecting a major shortfall of Rs 576 million. A substantial growth in CNG stations was witnessed in Pakistan.