ISLAMABAD: The federal government may impose General Sales Tax (GST) on all petroleum products with effect from October 1, 2022 to generate revenues amid decreasing oil prices in global market, sources in petroleum division said.

A proposal has been moved to Prime Minister Shehbaz Sharif. In case it gets approval, the consumers will pay tax on account of Rs 10.5 percent GST and Rs 30 per litre petroleum levy (PL), in addition to paying other charges like dealers and distribution companies’ margins. An official of Petroleum Division on the condition of anonymity told Business Recorder that the government has set a target to collect revenue of Rs 91 billion from both GST and PL on petroleum products.

He said that government is expected to collect Rs 60 billion PL and Rs 31 billion GST per month but depends on oil prices internationally and exchange rate.

This will guarantee minimum Rs 279 billion per annum revenue only on account of GST from petroleum products at current consumption levels, said the sources.

At present, the government charges no GST on petrol, high speed diesel (HSD), kerosene oil (SKO) and light diesel oil (LDO). Due to increased prices of petrol in global market and unstable exchange rate, the government’s tax revenues from petroleum products have been adversely affected.

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The federal government has not charged GST on all petroleum products since February 1, 2022.

The opponents of the proposal are of the view that the government was already charging Rs 10 and Rs 20 PL to protect its revenues from the adverse impacts of the reduction in prices.

The advantage of the PL is that collection under the levy is not shared with the provinces. The GST collection becomes part of the federal divisible pool that is then distributed between the Centre and the provinces under the National Finance Commission award. For the current fiscal year, the government has projected PL collection at Rs 750 billion.

Copyright Business Recorder, 2022

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