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Sales tax payment system for oil marketing companies simplified

ISLAMABAD (September 12 2004): The Central Board of Revenue (CBR) has announced new, simplified procedure for payment of sales tax by oil marketing companies, like 'product sharing' concept applicable in European countries.

The product sharing means “acquiring of a product by one OMC from another OMC on loan basis, without payment of price under an arrangement of returning the product of the same description by the former to the latter, within such time as may be agreed between them”.

The CBR on Saturday issued 'Special Procedure for collection and payment of sales tax from the oil marketing companies (sharing of product) rules 2004'.

Official sources told Business Recorder that the new system would not only eliminate duplication of taxes but would also end unnecessary paper work by these oil marketing companies.

The product sharing or stock lending is normally allowed out of the value-added tax (VAT) mode framework in the European countries. This concept has now been introduced in Pakistan through SRO 776(I)/2004.

The rules will be applicable for collection of sales tax from Shell Pakistan Limited, Caltex Oil (Pakistan) Limited and Pakistan State Oil (PSO).

These companies have built a joint installation of the oil marketing companies (JIMCO) at Mehmood Kot, to store and market all taxable petroleum products in different provinces.

The rules provide for stock lending to each other without revenue loss to the national exchequer.

The stock of a product moved for exchange under these rules shall not be required to be declared on the sales tax return unless finally supplied or sold on payment of sales tax.

The OMCs will be entitled to share their products without payment of sales tax at JIMCO. No sales tax invoices shall be issued for the product shared between OMCs provided that the OMCs shall not be barred from adhering to an internal invoicing system for the purpose of stock sharing.

The OMC which has borrowed the product from another OMC shall return the product of the same description within the specific time agreed between them.

Under the procedure, each OMC, benefiting from stock sharing facility, shall maintain a separate register for recording movements of stocks under sharing arrangements between OMCs.

The stock sharing register maintained shall contain such information about credit and debit of the shared or returned stocks as is necessary to identify the movement of such stocks between the concerned OMCs.

The Terminal Operator shall certify the bona fides of all the credit and debit entries made in the stock sharing register by 10th of each month following the month to which the entries relate.

The stock sharing register, duly certified by the Terminal Operator as aforesaid, shall be produced to the sales tax department, as and when required for inspection, audit or any other authorised purpose. The OMC which has given a product to another OMC on stock sharing basis shall be entitled to avail input tax adjustment, as provided under the Sales Tax Act.

The OMC, which has taken a product from another OMC, shall pay sales tax on its supply or sales to the buyer or consumer without claiming any input tax adjustment thereon.

The OMC, to whom a product taken on stock sharing basis is returned, shall pay sales tax on its supply or sale to the buyer or consumer and input tax adjustment thereon shall be admissible, if not already availed.

The OMC, which has taken any stock of a product on sharing basis under these rules, shall not normally charge the price, over and above the price which would have been fetched by such stock had it been supplied or sold by the lending OMC.

No adjustment, refund or remission of sales tax shall be allowed under any circumstances on account of variation or difference of the sale price of the exchanged stocks.

The audit of the records of OMCs for verification of the correct payment of sales tax on monthly basis shall be conducted once in a year.

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