ISLAMABAD: The government reduced the rate of petroleum levy (PL) on High Speed Diesel (HSD) - from Rs 3.61 per litre in the second half of June 2021 to Rs 1.90 per litre effective 1 July - and abolished it on all other petroleum products for July 2021 with a projected negative revenue impact of Rs10 billion for July.

The rates of general sales tax (GST) on petroleum and products have also been revised downward for July: on petrol GST has been reduced from standard 17 percent to 16.30 percent; on Kerosene Oil (SKO) and Light Speed Diesel (LDO) GS has been reduced to 6.70 percent from 9.15 percent and 0.20 percent from 2.74 percent respectively. However, the rate of GST on HSD is kept at standard 17 percent.

Successive administrations have relied heavily on taxing HSD, in use mostly by agriculture and public transport, while petrol is used by vehicle owners as well as cabs. Thus the raise in price of HSD due to the continued levy of PL and the standard sales tax rate of 17 percent would imply that the most affected would be the common man however by abolishing the PL and reducing the sales tax on petrol the millions of vehicle owners in this country (cars and motorbikes) would not have to bear a raise in their transport costs.

Officials in Oil and Gas Regulatory Authority (Ogra) told Business Recorder that the government is collecting Rs 11.48 per litre GST on petrol which was Rs 15.88 per litre in second half of June.

The government collected Rs369 billion PL in the first nine months (July-March) of 2020-21 and Rs131 billion is required in the last quarter (April-June) to attain the revised estimates of Rs 500 billion however repeated requests by Business Recorder for up-to date data did not bear fruit till the filing of this report.

The data released by Oil Companies Advisory Council (OCAC) shows that overall petroleum sales in 2020-21 were higher by 18 percent last year compared to the year before - 19.5 million tons. A representative of OCAC on condition of anonymity said that expected higher consumption of petroleum products last year may achieve the Rs 131 billion in the last quarter of 2020-21.

International price of oil is on the rise as demand has risen as more and more countries have come out of the Covid19 lockdown. Brent crude reached $78.34 per barrel on July 2, 2021. This was the highest price since October 23, 2018.

Copyright Business Recorder, 2021

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