Petroleum products into sales Tax exemption: Change of status of zero-rating to benefit FBR worth Rs20bn

ISLAMABAD: The change of status of zero-rating of petroleum products into sales tax exemption would benefit Federal Board of Revenue (FBR) to the tune of Rs18-20 billion.

Sources told Business Recorder that the industry is now unable to take refunds due to change of status from sales tax zero-rating into sales tax exemption of petroleum products. Prior to budget (2024-25), the industry was taking refunds due to sales tax zero-rating status of petroleum products.

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 levy of sales tax.

The change of status would have positive revenue impact of Rs18-20 billion, the sources added.

The refineries/oil marketing companies are requesting the government to change the said amendment made through Finance Act 2024. Resultantly, up to 80-85 per cent 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 FBR is examining a proposal on 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 standard rate of 18 percent sales tax on POL products was turned down by the prime minister as it is inflationary having immediate impact on the general public.

Copyright Business Recorder, 2024