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White oil pipeline project: duty, tax relief restored for machinery imports

ISLAMABAD (January 22 2003) : The government on Tuesday restored the exemption of customs duty and sales tax on the imports of machinery and equipment for white oil pipeline project.

The GST/duty exemption would be available on the imports of machinery, equipment, materials, accessories, spares, chemicals and consumables, as were not manufactured locally, whether imported on permanent basis or temporarily for the oil pipeline projects under SRO 236(I)/98, dated 4th April 1998.

Previously, SRO 236 was rescinded in budget 2002-2003, which resulted in the application of standard rate of duty (10-25 per cent) on the import of machinery/equipment for white oil pipeline project.

The government has now restored the exemption under the ECC decision, saying: “To encourage investment in energy sector, ECC restored exemption previously available to permanent imports under SRO 236 (i)/98 through making amendments in SRO 367(i)/94, dated 9.5.1994”.

This exemption was given in order to reduce the up-front capital cost of the projects and to give benefit to GOP in getting quotation of lower tariff, which otherwise would have been adjusted by the investors to recover the increased capital cost.

In view of the government's commitment to reduce the number of concessionary SROs, an exercise was carried out during the budget 2002-03 to combine the concessions available to all petroleum sector projects under various notifications into a single SRO.

As a consequence SRO 236(I)/98 was merged into SRO 367(I)/94, dated 9.05.1994, it further stated.

The CBR said, while merging the SROs, "permanent imports” of machinery and equipment, etc., for pipeline projects covered under SRO 236(I)/98 escaped attention and therefore did not find place in the existing SRO 367(I)/94, whereas “temporary imports” were included in the said SRO.

The CBR is of the view that the aforesaid inadvertent omission with regard to concessions available to permanent imports of machinery and equipment etc., for the white oil pipeline project being executed by M/s Pak Arab Pipeline Company were adversely impacted.

In order to undo this error, it was proposed that the exemptions previously available to “permanent imports” under SRO 236(I)/98 may be restored by making necessary amendments in SRO 367(I)/94, dated 9.5.94.

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