The Financial Express

Oil, gas companies in trouble due to tax complexities

| Updated: March 12, 2021 20:28:48

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The International Oil Companies (IOCs) as well as local ones are facing complexities in releasing imported supplies and equipment for gas plants from the ports due to imposition of taxes.

The IOCs has been enjoying a VAT rebate on some items for last 20 years, before scrapping the facility through a Statutory Regulatory Order (SRO) in June 2020.

The ministry of power, energy and mineral resources, Petrobangla and a US-based IOC, Chevron Bangladesh, have requested the authorities concerned to solve the issue immediately.

These complexities are causing delays in releasing the goods from the ports which might increase the cost for operations of the gas plants, Chevron Bangladesh president Eric M Walker wrote in a letter to the Petrobangla.

The energy and mineral resources division (EMRD) on February 1 last wrote to the National Board of Revenue (NBR) to take necessary measures in this regard.

Earlier, Petrobangla on January 17 this year and Chevron Bangladesh on December 14 last year sent two letters to the NBR, seeking remedial measures.

Talking to the FE, a senior official of the EMRD said the problem should be solved through reinstating the VAT rebate on imported services and waiving the import duties on other products of the IOCs.

He said the IOCs and other local companies were facing problems in releasing the goods from the ports due to cancellation of a SRO that had offered tax-free import of some products.

However, the IOCs and some other companies are required to pay import taxes on many other products those are not included in the exemption list, according to a letter to the EMRD signed by Abdullah Arif Mohammad, senior assistant secretary.

It said that the revenue board has scrapped the duty-benefit for a number of goods that are directly involved with the petroleum operations.

This situation has created a possibility of imposition of duty on some products which were previously exempted, it added.

The Chevron Bangladesh president has requested the Petrobangla for taking steps to organise a tripartite meeting on an urgent basis for reviewing the situation.

In addition to the ongoing activities, Chevron will be undertaking several major petroleum operations in the year 2020-2021, he wrote.

The Chevron will also require a lot of imported services from third party vendors in addition to materials for these activities, he added.

"It is very critical for Chevron's operation and the project implementation perspectives to reach a solution by reinstating the benefits," he said.

He also said that the Chevron had not seen much progress on its proposal to replace the SRO 132 by issuing new SRO and reinstate SRO 202 which had been following for more than 20 years.

"As a result, it is increasing unnecessary delays to our planned activities/projects and eventually increasing cost of operations and projects," he said.

The company is experiencing significant challenges in releasing the imported supplies and equipment necessary for the continued safe, reliable operations for the gas plants, he added.

Chevron Bangladesh Block Twelve Ltd and Chevron Bangladesh Blocks Thirteen and Fourteen Ltd is delivering 55 per cent of the country's domestic gas production every day.

NBR officials said they would resolve this issue through holding a meeting with the Petrobangla and EMRD.

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