Business

Oil consumers likely to cough up Rs48b in taxes in just 18 days

Taxes are particularly high on widely consumed petrol and diesel

Zafar Bhutta June 30, 2018

The deemed duty of Rs8.24 per litre has been going into the pockets of oil refineries for about a decade which was allowed by successive governments in a bid to encourage them to upgrade plants for the production of high-quality petroleum products. PHOTO: FILE

ISLAMABAD: Consumers of petroleum products in Pakistan are expected to pay Rs48 billion in taxes in just 18 days of the current month since the caretaker government revised retail prices upwards.

In particular, taxes are very high on petrol and diesel that are widely consumed and have a direct impact on inflationary pressures.

The caretaker administration, which took reins of the country on June 1, increased prices of petroleum products from June 12. Earlier, the outgoing Pakistan Muslim League-Nawaz (PML-N) government left the rates unchanged in monthly revision, leaving the task for the upcoming caretakers.

“Consumers will be paying Rs48 billion in general sales tax and petroleum levy from June 12 to the month’s end,” an official said quoting estimates, adding tax payments for the entire month would be around Rs70 billion.

According to the breakdown available with The Express Tribune, the government will collect Rs17.8 billion in petroleum levy and Rs30.02 billion in general sales tax on petroleum products in last 18 days of June.

In addition to these taxes, the government is also receiving billions of rupees from consumers every month in customs duty and deemed duty on the sale of petroleum products.

It is collecting 4% customs duty on petrol that comes to Rs2.59 per litre and 12% customs duty as well as 7.5% deemed duty on diesel that amounts to Rs8.24 per litre.

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The deemed duty of Rs8.24 per litre has been going into the pockets of oil refineries for about a decade which was allowed by successive governments in a bid to encourage them to upgrade plants for the production of high-quality petroleum products.

Average monthly demand for petrol is calculated at 625,000 tons, high-speed diesel 750,000 tons, kerosene oil 15,000 tons and light diesel oil 2,000 tons.

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The government is receiving taxes of Rs36.62 on the sale of high-speed diesel out of the total price of Rs105.31 per litre. Diesel is widely used in the field of agriculture as well as public and goods transport and leaves a direct impact on inflation in the country.

According to the breakdown, Rs8.24 is collected in customs duty on diesel, Rs20.38 in general sales tax and Rs8 in petroleum levy. Consumers are also paying a margin of Rs2.41 per litre to oil marketing companies and Rs2.67 per litre to dealers.

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On the sale of petrol, the government is receiving Rs22.44 in taxes on per-litre sale. Of this, Rs2.59 comes in the shape of customs duty, Rs9.85 in general sales tax and Rs10 in petroleum levy.

It is also collecting general sales tax of Rs9.04 and petroleum levy of Rs6 on the sale of a litre of kerosene oil. On light diesel oil, general sales tax stands at Rs6.19 per litre and petroleum levy at Rs3 per litre.

Published in The Express Tribune, June 30^th, 2018.

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