Singapore — China will further tighten regulations over oil product consumption tax starting from March 1, according to an updated announcement posted on the website of the State Administration of Taxation late Monday.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The announcement aims to strengthen consumption tax regulations for oil products including gasoline, gasoil, jet fuel, naphtha, solvent oil, lubricant oil and fuel oil, SAT said.
The key difference from the previous version of regulations was the SAT will require refineries and oil product sales companies to report their deals in a special tax issuance module under a new system allowing the local tax authority to collect consumption tax on products properly by monitoring the whole transaction chain of the product from producers to end users.
The move is aimed at closing possible loopholes that allowed for consumption tax evasion, market sources said.
China currently levies a consumption tax of Yuan 1.52/liter (23 cents/liter or Yuan 2,110/mt) on gasoline, and Yuan 1.2/liter on gasoil.
"The new regulations are very detailed, considering practically every process of the transaction," a market source in eastern China said.
"This means it's almost impossible for oil product sellers to get a gasoline invoice for blended barrels with free-taxed products, such as mixed aromatics, alkylates and so on."
"They will have to pay consumption tax when selling gasoline to state-owned oil retail stations, which account for around 70% of China's oil product market share," the source said.
Affected by the new regulations, 92 RON gasoline, which meets national Phase 5 emission standards, jumped around Yuan 500/mt to around Yuan 7,200/mt Tuesday in southern Guangdong province, a trader with PetroChina's Guangdong sales branch said.
Gasoline prices in the eastern province of Shandong showed little change Tuesday, according to a trader with Linjin Petrochemical, one of major independent refineries in the region.
"Unlike southern China -- the largest consumer place for blending gasoline in Shandong is mostly produced by refineries, so its price was not affected much by the new regulations," another oil trader in southern China said.