Karachi, December 26, 2023 – The Federal Board of Revenue (FBR) has granted permission for tax-free sharing of petroleum products among Oil Marketing Companies (OMCs).
This move, outlined in the updated Sales Tax Rules, 2006, applicable for the tax year 2024, is set to streamline and facilitate the sharing process within the oil industry.
According to the FBR’s announcement, Rule 163 has been introduced to elucidate the tax-free sharing of petroleum products by OMCs. The specific details of the rule are designed to foster collaboration and resource optimization within the industry.
Rule 163: Sharing of Petroleum Products by Oil Marketing Companies
Under this new provision:
1. Loan-Basis Sharing: Oil marketing companies are now entitled to share their petroleum products on a loan basis without the obligation to pay sales tax. This sharing arrangement is permitted at the Joint Installation of the Oil Marketing Companies (JIMCO) located at Mehmood Kot, District Gujrat, Punjab. Notably, no sales tax invoice shall be issued for the products shared between OMCs under this arrangement. However, OMCs are allowed to maintain an internal invoicing system for stock sharing purposes.
2. Sales Tax Invoicing: When an OMC makes a further supply of the product obtained on a loan basis to another customer, it is required to issue a sales tax invoice for that transaction.
3. Record Keeping: OMCs benefiting from the stock-sharing facility are mandated to maintain a separate register, recording movements of stocks under sharing arrangements. This register must contain pertinent information about the credit and debit of the shared or returned stocks, facilitating the identification of stock movements between involved OMCs.
4. Certification by Terminal Operator: The Terminal Operator overseeing the facility must certify the legitimacy of all credit and debit entries made in the stock-sharing register by the 10th of each month following the relevant month.
5. Production of Records: The certified stock-sharing register is to be produced to the Regional Tax Office (RTO) or Large Taxpayer Unit (LTU) concerned when required.
6. Sales Tax Adjustments: Importantly, no adjustment, refund, or remission of sales tax will be permitted under any circumstances due to variations or differences in the sales price of the exchanged or loaned stocks.
This development is expected to enhance operational efficiency and cost-effectiveness within the oil industry by fostering collaboration between OMCs. While promoting the seamless sharing of petroleum products, the FBR remains vigilant about compliance and record-keeping, ensuring transparency and accountability in the process.
As industry stakeholders adapt to these new rules, the FBR’s initiative aims to strike a balance between facilitating business operations and maintaining necessary regulatory oversight. It is anticipated that this measure will positively impact the petroleum industry’s logistics and supply chain dynamics in the coming months.
