Imran takes U-turn on GIDC waiver

• PM directs attorney general to approach Supreme Court for urgent hearing of pending litigation
• Says taxes were written off in a bid to recover 50pc of ‘stuck revenue’ by way of an out of court settlement

ISLAMABAD: Prime Minister Imran Khan on Wednesday retracted the decision of granting tax exemptions to wealthy industrialists by waiving off Gas Infrastructure Development Cess (GIDC) after it came under intense criticism by public and opposition parties alike.

The U-turn came days after the government wrote off Rs208 billion in taxes to the capitalists through a presidential ordinance.

After the decision came under fire, the prime minister, in a cabinet meeting, made remarks that the decision was taken to provide relief to the public instead of some individuals.

According to a statement issued by the Prime Minister’s Office (PMO) on Wednesday, the premier decided to withdraw the presidential ordinance regarding the GIDC, directing the attorney general to “approach the Supreme Court (SC) for urgent hearing of the matter”.

The decision to go to the apex court was taken so that the matter could be decided at earliest, strictly in accordance with the law and the constitution. However, the government is concerned over going to the SC, saying the decision could go either way and then it wouldn’t get even half of the money under the GIDC head.

“Going to court carries a risk because the decision could go either way. This means that the government could get the whole amount or could lose it all and possibly forgo any prospect of future revenue collection under the head,” added the statement.

“Also, on top of this, the government could be saddled with the burden of administering refunds of approximately Rs 295 billion of the principal amount,” the statement added.

Though there have been multiple clarifications by the prime minister’s economic team after the decision, it has now come up with a new justification for its decision to write off these taxes through an ordinance.

The government exempted the taxes in a bid to recover 50 per cent of the “stuck revenue by way of an out of court settlement after consultation with the industry”.

The PM statement also said that the total amount stuck in the GIDC litigation from January 2012 to December 2018 was about Rs 417 billion.

In the first round of litigation, SC annulled the GIDC while the federal government’s review petition was also dismissed by the top court.

Thereafter, fresh legislation was brought about, which are presently under challenge before the provincial high courts and a set of appeals is already pending in the SC.

The government, strapped for cash, was willing to forgo half of what it was owed meant that their case pending in the Supreme Court was quite weak, especially considering that one of the conditions for the waiver was that the companies would subsequently withdraw their cases.

After the government forwent the GIDC, the sectors–CNG, fertiliser, captive power industry, Karachi Electricity, generation companies (GENCO) and independent power producers (IPPs)—had been asked to pay half of the outstanding cess levied or charged from the May 22, 2015 to the December 31, 2018, after entering into an agreement with the SNGPL and SSGCL within 90 days of the commencement of the said ordinance.

The GIDC was initially introduced on November 25, 2011, as a money bill. The main objective of the levy of GIDC was to raise the funds for undertaking the development of infrastructure related to transnational gas pipelines and Liquefied Natural Gas (LNG) projects.

Even, the SC in June 2014 held that GIDC was a fee, not a tax. Subsequently, the government on Sept 24, 2014, promulgated the GIDC Ordinance which was also challenged in various courts. Upon this, the government promulgated the GIDC Act in 2015.

The consumers challenged the GIDC Act, succeeding to get a stay against the act.

Resultantly, the arrears amounts of GIDC have been accruing from the inception of GIDC i.e. from January 2012 to December 2018.

As per documents, total GIDC outstanding amount pre-GIDC Act 2015 was Rs 147.2 billion, while the total amount of outstanding post-GIDC Act 2015 up to December 2018 was Rs 269.1 billion.

Sector-wise and company-wise details before GIDC Act 2015 said that outstanding amount with fertiliser (fuel) was Rs0.9billion; fertiliser (old) Rs15.1bn; fertiliser (new) Rs8.5 bn; industry Rs 20.7bn; IPPs Rs9.6bn; KESC Rs 25.3 bn; captive power Rs28 bn; CNG Region-1 Rs 21.2bn and CNG Region-2  Rs18 bn.

Similarly, outstanding amount after the promulgation of the act in 2015 up to December 2018 is: fertilizer (fuel) was Rs1.5bn; fertiliser (old) Rs57.5bn; fertilizer (new) Rs54.5bn; industry Rs21.8bn; IPPs Rs 2.5bn; KESC  Rs 32.1bn; captive power Rs63.4bn; CNG Region-1 Rs22.6 bn; CNG Region-2 Rs 18.3bn.

As per the documents, people paid Rs701bn to the government in 2012-2018, while Rs285bn was deposited to the national exchequer.

The government had imposed surcharge worth Rs300/MMBTU on the gas used in fertiliser plants as feed while Rs150/MMBTU on the gas used as fuel in fertiliser plants. Likewise, the government had imposed the surcharge of Rs200 /MMBTU on captive power plants and Rs100/MMBTU on other industries.