10% incentives offered for petroleum refineries in budget
The finance division has proposed 10 percent protection as an incentives for petroleum refineries in budget 2021-22.
The petroleum division had proposed several incentives in the new oil refinery policy 2021. It had also moved a summary to Economic Coordination Committee (ECC) for approval of incentives for petroleum refineries.
However, the government had decided to approve these incentives in budget 2021-22. Now, the finance ministry had introduced these incentives in finance bill 2021-22 on Friday.
CUSTOM DUTY
The finance division proposed 2.5% CD and 0% ACD on crude petroleum oil for registered oil refineries as an incentive for one year in Fifth Schedule.
It will be for the upgradation of existing refineries to produce environmentally friendly EURO-V specification petroleum products and attract investment in new profound conversion integrated projects.
It further proposed to reduce customs duty (CD) on High-Speed Diesel to 10% in the Fifth Schedule.
The finance division further proposed to increase customs duty (CD) on motor sprit from 5% to 10% in Fifth Schedule.
SALES TAX
It proposed to draw zero ratings from crude petroleum oil to process by refineries. It further offered to withdraw zero-rating on Parts and components of zero-rated plant and machinery.
Finance Ministry further recommended withdrawing zero-rating on importing plant and machinery by petroleum and gas sector and supply.
INCOME TAX
It proposed exemption from tax on income of profound conversion new refineries and BMR projects of existing refineries for ten years. The Finance Ministry also proposed to reduce the rate of WHT by 3% on oil field services.
The FBR also proposed to withdraw withholding tax on CNG sector and also withdrawal of withholding tax on certain petroleum products.
The incentives are budget proposals in the custom manual of FBR. In the policy, oil refineries had agreed to reduce the duty on crude import to zero.
Refineries say that the 2.5% duty will reduce refineries’ incentives to half. At least refineries had gained in products duty structure but will positively impact the overall context.
Reduction in Turn over tax from0.75 to 0.5 is gain, sales tax on crude import is loss and cash flow issue with funds recovery from product sales. However, there will be an issue for Naphtha exporting refineries.
