FBR slaps Rs80/litre FED on 3 POL products

ISLAMABAD: The Federal Board of Revenue (FBR) has imposed Federal Excise Duty @ Rs 80 per litre on three petroleum products including petroleum top naphtha, white spirit/ mineral turpentine oil (MTT) and solvent oil from July 1, 2026.

In this regard, the FBR has issued sales tax budget instructions (2026-27) to the field formations on “Curbing adulteration in petroleum products through FED intervention.”

According to the FBR’s instructions on Finance Act 2026, the petroleum products are chargeable to petroleum development levy (PDL), whereas, petroleum top naphtha, white spirit/ mineral turpentine oil (MTT), and solvent oil are not chargeable to PDL.

Certain unscrupulous elements started taking advantage of this difference by mixing these into PDL chargeable products and sell at higher price.

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To curb this practice, now FED on these three products has been levied @ Rs 80 per litre on the aforementioned products in sales tax mode. However, for the industries using the said products as industrial input material, a contingent mechanism has been provided for exclusion/exemption of persons or class of persons from the charge of this duty where final product is either exempt from sales tax or where both the supplier and the manufacturer are integrated with the Board’s computerized system for issuance of digital invoices, subject to the conditions laid down, FBR added.

The FBR further stated that the FED on certain petroleum products has been imposed by adding S. No. 65 of Table-1 of the First Schedule to the Federal Excise Act, 2005. The same goods have also been added in the Second Schedule for imposition of FED in sales tax mode which will enable the registered person to adjust the said duty against output sales tax.

Upgradation of refineries is essential to align domestic refining capacity with modern environmental standards, including cleaner fuel specifications, improved emission controls, and reduced carbon and Sulphur intensity. Secondly, major petroleum products of a refinery are not chargeable to sales tax. In refinery upgradation, scheduled turnaround, maintenance and overhaul of a refinery require import of high value machinery, equipment, other parts, etc. which are chargeable to sales tax. Exemption of sales tax on specified items has been granted with prior approval of the Division concerned, the FBR added.

Copyright Business Recorder, 2026