Govt to Collect Extra Rs. 20 Billion Per Year From Refineries

The government will save an annual amount of nearly Rs. 20 billion after the change of status of zero-rating of petroleum products into sales tax exemption in the budget (2024-25).

In the Finance Act 2024, Motor Spirit (Petrol), High-Speed Diesel, Kerosene, and Light Diesel Oil (LDO) have been changed from taxable supplies to exempt from the levy of Sales Tax.

The change of status will have a positive revenue impact of Rs. 18-20 billion.

The industry is now unable to take refunds due to a change of status from sales tax zero-rating to sales tax exemption of petroleum products. Prior to the budget (2024-25), the industry was taking refunds due to the sales tax zero-rating status of petroleum products.

The refineries/oil marketing companies are requesting the government to change the said amendment made through the Finance Act 2024. Resultantly, up to 80-85 percent of the input tax will be disallowed resulting in a substantial increase in the operating cost as well as project cost, as per refineries.

The Federal Board of Revenue (FBR) is examining a proposal on the estimated revenue impact of the proposal to impose a lower rate of 3-5 percent sales tax on petroleum products.

During the budget preparation exercise for 2024-25, the proposal to impose a standard rate of 18 percent sales tax on POL products was turned down by the Prime Minister as it is inflationary having an immediate impact on the general public.