State-owned energy companies forewarn gas cutoff following impending acute liquidity crisis attributable to nearly Tk 27 billion overdue refund of excess taxes charged by taxmen.
Petrobangla has reported that the gas-supply system is under threat from fund shortfall affecting gas-distribution companies.
According to the corporation, the refund claims from Titas Gas Transmission and Distribution Company total Tk 20.89 billion, accumulated over time since fiscal year 2018-19 till 2023-24.
Additionally, four gas-distribution companies hold arrears worth Tk 5.57 billion for the same period.
Specifically, the National Board of Revenue (NBR) owes Tk 1.97 billion to Bakhrabad Gas Distribution Company Limited, Tk 2.18 billion to Jalalabad Gas Transmission and Distribution Systems, Tk 989 million to Karnaphuli Gas Distribution Company Limited, and Tk 458 million to Pashchimanchal Gas Company Limited, as of June 30, 2024.
State-owned oil and gas companies are compelled to pay higher taxes than their actual liabilities for not allowing refund of the excess taxes paid.
Over the last five years, these companies have overpaid taxes, exceeding their corporate-tax rates, which come to 22.5 per cent for Titas (as a publicly-listed company) and 27.5 per cent for others.
AKM Mizanur Rahman, Director of Finance at Petrobangla, says source taxes were adjustable or refundable against actual payable taxes until June 2024.
While the government has reduced the tax rate from 3.0 per cent to 2.0 per cent in the current fiscal year, the new regulations eliminate the refund option.
"Previously refundable or adjustable, tax claims have now been rendered non-refundable in the Finance Bill for 2024," he adds.
Such tax measures are anticipated to adversely affect gas companies.
Petrobangla has placed a proposal with the NBR chairman for reinstatement of the adjustability or refundability of these taxes.
In a letter dated November 11, 2024, Petrobangla Joint Secretary AZM Sharjil Hassan raised such concerns as they fear the liquidity crisis facing gas companies could disrupt gas supply.
Currently, consumers in eight categories, excluding residential users, are subject to 2.0-percent tax at source which distribution companies collect.
Petrobangla data indicate that gas companies pay Tk 0.86 per cubic meter of gas supplied, with profit margins ranging from Tk 0.18 to Tk 0.37 (with a gas price of Tk 22.87 per CM). The primary income for gas companies derives from distribution margins and demand charges.
According to Petrobangla, the source tax exceeds the income generated through gas sales.
In FY 2023-24, the total sales value of gas was Tk 584.82 billion, with gas sales (excluding domestic consumers) valued at Tk 528.70 billion.
The payable taxes for these sales amounted to Tk 15.56 billion, compared to a profit margin of Tk 6.42 billion.
For FY 2024-25, gas companies anticipate total payable taxes of Tk 11.60 billion based on a 2.0-percent tax rate against a total gas selling value of Tk 589.62 billion and a profit margin of Tk 6.61 billion.
A senior tax official comments that field offices are generally reluctant to authorize tax refunds, as they are under pressure to meet ambitious targets each fiscal year.
The NBR has conducted several meetings with Petrobangla to address the complexities surrounding outstanding taxes, sans a breakthrough so far.
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