Islamabad - Almost all the stakeholders have strongly opposed the government move of enhanced 20 percent GST on High Sulpher Furnace Oil (HSFO) used by Independent Power Producers (IPPs) and warned that it will create cash liquidity problems besides increasing the electricity price for the end consumers.
In its comment on a summary ‘Change in GST on Furnace Oil and its implication on independent Power Producers’, the National Electric Power Regulatory Authority (NEPRA), Ministry of Water and Power, and Central Power Purchasing Agency (CPPA) have termed the increased GST on High Sulpher Furnace Oil(HSFO) consumed by the IPPs as counterproductive, official sources told The Nation here Sunday. The Ministry of Planning Development and Reforms also objected the increase and has supported the withdrawal of the 3 percent extra GST, the sources said. The summary will be moved to the Economic Coordination Committee of the cabinet (ECC) for approval.
Under the Sales Tax 1990 (STA), government was levying HSFO at the rate of 17 percent GST. The amount was adjustable against the GST payable on the sale of electricity, while any excess balance is recoverable from the FBR. However, through a new SRO issued by FBR, on September 30, 2015, the GST on the import and supplies of HSFO was enhanced to 20 percent.
In its comment on the ECC summary, NEPRA said that it is the prerogative of the federal government to impose any percent of GST, however, it will have a serious repercussions on the financial obligation of the IPPs operating on High Sulpher Furnace Oil, the source said. The decision will also create liquidity problems for these IPPs, the regulatory body said. According the Power Regulatory Authority the decision will also affect the bills of the electricity consumers.
In the view of the Ministry of Water and Power, GST on Furnace Oil is pass-through item and will affect the end consumers. It further said that increase in GST will require an increased amount to be paid, by IPPs, to HSFO suppliers, which will adversely affect their cash flow. It further said that the settlement of refunds in the FBR takes a long time and the 3 percent increase would considerably enhance IPPs working capital requirement. The Ministry of Water and Power has asked for the withdrawal of 3 percent increase in General Sales Tax (GST) on High Sulpher Furnace Oil (HSFO), the source said.
The Central Power Purchasing Agency (CCPA) has also supported, the water and power view, on the enhancement in the rate of General Sales Tax (GST) on HSFO consumed by the IPPs and said that it will adversely affect the end consumers.