The deal on a controversial levy comes as the company reports an 11.7pc profit rise in the six months to September Mainland-based Wah Sang Gas Holdings has settled a controversial tax levy issue with local authorities, clearing up concerns over its profitability. Reporting the piped-gas company's 11.7 per cent interim profit rise to $146.75 million yesterday, chairman Shum Ka-sang said Wah Sang had stopped making any provisions on its exposure to the state's value-added tax policy. He said some local tax bureaus agreed that Wah Sang's lucrative gas pipeline construction business did not fall into the value-added tax net, which meant the company was allowed to continue paying a 3 per cent business tax instead of a 13 per cent value-added tax levy. 'We have positive response from local tax bureaus, but we're waiting for the state tax bureau's confirmation,' Mr Shum said. He added that Wah Sang would write back a $12 million provision on the value-added tax exposure in the second half of its financial year to March 31 next year if it received a favourable confirmation from the state tax bureau. The controversy stemmed from the state tax bureau's decision in January to replace the 3 per cent business tax with a 13 per cent value-added tax on gas firms' pipeline construction business, which generates a one-off but lucrative connection or subscription fee to gas supply services. The move was part of the central government's overhaul of its chaotic tax collection system. During the six months to September 30, connection fees continued to boost Wah Sang's turnover and profit, contributing 53.2 per cent to the company's $504.2 million turnover, which represents a growth of 40.8 per cent. Connection fees remained the most lucrative business, with a gross profit margin of 78 per cent, executive director and chief financial officer Ronny Cheung said. Wah Sang charged an average connection fee of 2,410 yuan (HK$2,239). However, the company's gross profit margin was dragged down to 13 per cent due to stronger growth of the less lucrative wholesaling and retailing of liquified petroleum gas (LPG) and piped gas, Mr Cheung said. The gross profit margin of this LPG trade stood at 4.6 per cent for the interim period, whereas piped gas remained in loss. 'It's a reality that the lower the connection fee contribution, the lower the gross profit margin,' he said. 'However, as sales volume of LPG and piped gas will grow rapidly in the coming years, our profit margin will improve.' Mr Shum said Wah Sang planned to conclude about 10 projects every year, with locations primarily within its existing operating provinces of Anhui, Liaoning, Hebei, Hunan, Shandong, Jiangsu, Anhui, Zhejiang and Jiangxi and the cities of Beijing and Tianjin.