Progress in oil and gas rebate battle

The oil and gas industry has
embarked on a consultative
process with the International
Trade Administration
Commission of South Africa
(Itac) and SA Revenue Service
for the creation of a rebate
facility for the temporary
importation of equipment for
the sector.
This comes
after a previous
application to
Itac was denied
as such a rebate,
in the form
envisaged at
that time, did
not have the
endorsement of
Sars.
Sars has
now agreed
in principle to
the creation of
certain general
rebate temporary import
provisions identifying oil and
gas equipment separately,
and extending the time frame
from six months to five years
to stimulate the industry and
facilitate trade.
A new application, submitted
under the auspices of the
South African Oil and Gas
Alliance (SAOGA), proposes
a new tariff heading under
Chapter 99 (the domestic
tariff heading provision of the
Harmonised System) with
a view to identifying oil and
gas equipment for customs
warehousing purposes and also
an exemption from security of
any VAT that will be rebatable
in terms of the new rebate
items, once implemented.
“It is our
opinion that no
sale of goods is
taking place,
instead goods
are merely being
repaired and
shipped back to
their respective
countries,” said a
customs expert
involved in the
process. “It is
essential that
we view the oil
and gas industry
separately from general cargo,
reducing industry red tape
and creating a viable economic
sector for the economy.”
According to a source, the
reason for the consultative
process being followed with
customs and Itac is that
temporarily admitted oil
and gas equipment is not
specifically mentioned in
any of the existing general
rebate provisions, making
such equipment subject to the
same onerous VAT security
requirements applicable to all
other goods, particularly high
risk goods, while the temporary
import period of six months is
totally impractical.
VAT payments on
temporarily imported items
for the oil and gas sector can
run into millions of rand
whereas the VAT is in fact
rebated in terms of Schedule 1
to the VAT Act.
“Had the identical goods
been entered duty paid, any
VAT disbursed would be
claimed back in the next VAT
input return of the importer
concerned. By contrast the
VAT security in the temporary
imports under general rebate
is typically tied up for six
months to several years,
placing anyone clearing the
goods under general rebate at
a significant disadvantage,”
explained the source.
In the meantime requests
by industry to see the
customs warehousing period
for oil and gas equipment
extended from two years to
an additional five years has
since been approved by Sars.
INSERT
It is essential that we
view the oil and gas
industry separately
from general cargo,
reducing industry red
tape and creating a
viable economic sector.