- Based on existing levels of consumption, estimated revenue loss on account of zero sales tax on petroleum products would be between Rs 21 to 25 billion in one month
ISLAMABAD: The federal government has abolished General Sales Tax (GST) on all petroleum products and reduced the rate of petroleum levy to absorb the international oil price rise with effect from February 1, 2022.
Price of petroleum products have peaked to 90 dollars per barrel in the international market - the highest level since 2014 with an increase of 14.5 percent in January over December.
Based on existing levels of consumption, the estimated revenue loss on account of zero sales tax on petroleum products would be between Rs 21 to 25 billion in one month, an official of Federal Board of Revenue (FBR) told Business Recorder on condition of anonymity.
The sales tax rates effective from 16 January to 31 January was 2.5 percent GST on petrol, 5.4 percent on high speed diesel (HSD), 8.3 percent on kerosene oil (SKO) and 2.7 percent on light diesel oil (LDO).
On Monday, Finance Division issued a notification stating that the existing GST rate and Petroleum Levy (PL) on various petroleum products are well below the budgeted targets and that the government is bearing the revenue loss of around Rs.30 billion (fortnightly) from what was budgeted to the current PL and ST rates.
The PL on petroleum products has also been revised downward. The rate of PL on petrol has been reduced from Rs 17.62 per litre to Rs 13.92 per litre, on HSD from Rs 17.14 to Rs 9.30 per litre, on SKO from Rs 5.91 to Rs 1 per litre and on LDO from Rs 7.66 to Rs 5.50 per litre.
The government, as per repeated statements by the Finance Minister Shaukat Tarin, pledged to the IMF under the sixth review that it would raise PL by 4 rupees per litre per month to reach the maximum allowed limit of 30 rupees per litre to minimize the shortfall from the budgeted amount of Rs 610 billion for the current fiscal year - a shortfall after the rejection by the Prime Minister to raise prices of petroleum and products during the current fiscal year.
The government announced that the PL target has been revised downward to Rs 330 billion for 2021-22 during senate standing committee on petroleum in December 2021 which was confirmed by Hammad Azhar, Minister Energy, in January 2022.
Copyright Business Recorder, 2022