The Supreme Court has finally announced its reserved verdict on the Gas Infrastructure Development Cess (GIDC). The court has ordered companies to pay the outstanding amount of Rs. 417 billion as per media reports. Further details of the verdict are still awaited.
A three-member bench of the apex court headed by Justice Mushir Alam had reserved the verdict on February 20, which was announced on Thursday (today).
Justice Mushir Alam read the reserved decision made by a three-member bench. The panel rejected the petitions in a 2-1 verdict, directing the companies to pay the Gas Infrastructure Development Cess.
It is pertinent to mention that the former government had imposed the tax of Rs. 417 billion while the incumbent regime had waived Rs. 220 billion. The government then withdrew the waiver ordinance after the opposition’s criticism.
According to a report by Topline Securities, this will result in a total corporate cash flow of Rs. 417 billion, however as per the report, companies can opt for the petition after deliberating on legal language of the verdict.
Topline Securities in its report said that that the largest cash outflow will be witnessed from fertilizer companies to the tune of Rs. 110 billion. Fauji Fertilizer will be required to pay Rs. 63 billion (43% of market cap) followed by Fauji Fertilizer Bin Qasim – Rs. 22 billion (109% of market cap), Engro Fertilizer – Rs. 19 billion excluding Enven amount (21% of market cap) and Fatima Fertilizer – Rs. 6 billion (10% of market cap).
Other companies like Lotte Chemicals, Engro Polymer, Lucky Cement, Century Paper Board, Gul Ahmed, and Feroze Mills would also be required to submit their dues, amongst others.
To recall, Gas Infrastructure Development Cess (GIDC) was imposed in 2011 as a fee for the construction of infrastructure projects such as the Iran-Pakistan pipeline, the Turkmenistan-Afghanistan-Pakistan-India pipeline and other the Liquefied Natural Gas (LNG) projects. After the Supreme Court’s ruling in Aug’14, where the GIDC was termed unconstitutional, the government passed the GIDC Bill 2014 through the National Assembly.
Following this, the GIDC Act, 2015 was made law, re-imposing the GIDC on industries.
Last year, through a Presidential Ordinance, the incumbent government amended the GIDC Act, 2015 whereby the notification required the fertilizer sector, captive power industry, KEL, GENCOS, and IPPs to pay 50% of the outstanding payables under GIDC, while waiving off the remainder. However, this was withdrawn later.
It is a developing story, will be updated accordingly.
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