The government will generate around Rs 1.5 billion additional revenue by not passing on the full impact of the decline in the international price of crude to domestic consumers. This was the outcome of a comparative analysis undertaken by Business Recorder given the General Sales Tax (GST) rate applicable in June 2017 on two major petroleum products in demand in Pakistan notably petrol (500,000 tons or 500 million litres per month) and High Speed Diesel (600,000 tons or 600 million litres per month) and the revised GST applicable in July.
Oil and Gas Regulatory Authority (Ogra) had recommended the government to reduce petrol price by Rs 3.33 per litre from Rs 72.80 to Rs 69.50 and High Speed Diesel price by Rs 2.7 per litre from Rs 81.40 to Rs 78.70 but the government reduced the price of the two products by Rs 1.50 per litre.
Had the government reduced the oil price as per Ogra recommendations its budgeted revenue loss would have been Rs 865 million - Rs 325 million on account of petrol and Rs 540 million on account of high speed diesel. Through SRO.581(I)/2017 dated June 30, 2017 issued by the Federal Board of Revenue (FBR) , the FBR has increased sales tax on motor spirit from 19.5 percent to 20.5 percent and reduced sales tax on high speed diesel oil from 34.5 percent to 33.5 percent effective 1 July 2017. The standard rate of sales tax is 17 percent however the higher rate on petroleum products, a source of great concern to the productive sectors unable to compete in the international market due to high input costs, is indicative of the government's reliance on those taxes that are easy to collect rather than those that promote the productive sectors. A senior FBR official told Business Recorder that if the FBR had maintained the higher rates of sales tax on POL products in 2016-17 as applicable in 2015-16, the FBR would have generated an additional Rs 120 billion in 2016-17.
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