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OMAP calls for reducing turnover tax for OMCs to 0.25%

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Raja Furqan Ahmed
ISLAMABAD: Oil Marketing Association Pakistan (OMAP) on Friday once again called on the government to remove the anomaly in the levying of turnover tax applicable to the oil marketing sector by linking it to margins earned by the Oil Marketing Companies (OMCs) and reducing its rate to 0.25 per cent. Dr Ilyas Fazil, Chief Executive Officer of OMAP, a representative body of Oil Marketing Companies (OMCs), in a letter to Finance Minister Shaukat Tarin said, “The rate of turnover tax (currently @ 0.75%) should be rationalized/aligned to remove all elements of discrimination and be reduced to 0.25% in order to provide much-needed relief to cash flows and profits.” “Minimum Tax should, moreover, be linked to the gross margins for OMCs rather than the revenues as OMCs have a very thin government-regulated margin,” he added. OMAP had sent representations to the finance ministry on the issue before the announcement of the federal budget as well.
The OMAP CEO contended that only fixed margin is the turnover/revenue of the OMCs and hence should form the basis of charging the minimum tax u/s 113 of the Income Tax Ordinance 2001. He emphasized that in the case of OMCs, the components of the selling price of Petrol and High-Speed Diesel (HSD) are regulated by the Oil & Gas Authority (OGRA) and other authorities. OMAP pointed out that although the profit margin of petroleum dealers, petroleum agents and distributors is higher than that of OMCs, the petroleum dealers operating petrol pumps are exempt (Clause 11A – Part IV – Second Schedule) and petroleum agents are enjoying a low rate of 0.25 per cent as compared to 0.75 per cent charged to OMCs.
“This is discriminatory, arbitrary and absurd as in the similar sector the persons with high-profit margin pay no/lesser percentage of tax on turnover while the OMCs having fewer profit margins suffer higher rates,” Dr Fazil underscored. He argued that the rate of 0.75% has been fixed for OMCs without taking into account the average profit to turnover ratio in the relevant sector, which is lower than many other industries for which the turnover tax rate has been fixed at 0.25%. Referring to the 0.25% minimum tax levied on rice mills and distributors of pharmaceutical industries, the prices of whose products are controlled by the government, OMAP said it too deserves a similar treatment for being a highly regulated sector. Besides, he said, the dealers, sub-dealers, retailers and wholesalers of fast-moving consumer goods, sugar, cement and edible oil have been allowed discounted rate of 0.25 per cent under Clause (24D) of Part II of the Second Schedule to the IncomeTax Ordinance, 2001. Petroleum Products also fall under the same FBR definition of fast-moving products (our storage and retail outlets are replenished on an hourly basis) and OMCs, therefore, should be treated in a similar manner, emphasized CEO OMAP.
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