Levy on high-grade petrol raised

ECC refrained from slapping 17% sales tax on high octane blending component

Our Correspondent November 05, 2022
Finance Minister Ishaq Dar said that the imposition of 17% general sales tax would increase the HOBC price by Rs45 per litre, therefore, he did not approve the proposal. photo: file


The government on Friday increased the petroleum levy on high-quality petrol to Rs50 per litre instead of slapping 17% sales tax and allowed an increase in premium for diesel-importing oil marketing companies (OMCs) in a move that would further increase fuel prices in Pakistan.

Federal Minister for Finance Ishaq Dar presided over a meeting of the Economic Coordination Committee (ECC) of the cabinet that took those decisions. The ECC decided to release Rs5 billion for holding the next population census, which would become the base for general elections next year.

The ECC, after deliberations, allowed the increase in petroleum levy from Rs30 to Rs50 per litre on RON 95 and above-grade fuel with effect from November 16, 2022, according to the finance ministry.

It argued that the high-quality petrol “is a luxury good being consumed by wealthy consumers in expensive vehicles”.

The decision will push the price of high octane blending component (HOBC) to Rs290 per litre.

The finance ministry said that the Federal Board of Revenue (FBR) presented a summary for the increase in the rate of sales tax on HOBC. It was conveyed that the sales tax on petroleum products was reduced to zero from February 1, 2022, which put pressure on the FBR’s efforts to achieve its revenue targets.

Finance Minister Ishaq Dar said that the imposition of 17% general sales tax (GST) would increase the HOBC price by Rs45 per litre, therefore, he did not approve the proposal.

The International Monetary Fund (IMF) has asked Pakistan to impose 17% sales tax on petroleum products in addition to the Rs50-per-litre levy.

Recently, the IMF also asked Pakistan to impose new taxes of Rs600 billion to increase the tax-to-gross domestic product (GDP) ratio to 9.5%. Possible revenue shortfall in the coming months may expose the government to more pressure from the IMF.

The Petroleum Division also submitted a summary about high-speed diesel (HSD)/ gasoil premium and informed the ECC that due to the difference between premium on diesel import by the OMCs and Pakistan State Oil (PSO), there was an unsustainable position for the OMCs and smooth supply of diesel in the country.

“In order to ensure sustained supply and import security, the ECC after detailed discussion allowed the premium on HSD subject to the maximum cap at $15 per barrel for the importing OMCs other than PSO for the months of November and December 2022,” said the finance ministry. The current premium is $8.5 per barrel.

The ECC also approved a technical supplementary grant of Rs5 billion for holding the seventh population census.

Earlier, the ECC had deferred decision on the technical supplementary grant summary for conducting the population and housing census but then the federal cabinet decided to hold the population census.

The federal cabinet has decided to hold next general elections on the basis of new population census that is tentatively planned to be conducted early next year.

Sindh has serious reservations about the results of last population census and Chief Minister Syed Murad Ali Shah voted against the final results in a meeting of the Council of Common Interests (CCI) held in April last year.

The Pakistan Bureau of Statistics is making preparations for the new census. The present assembly will complete its term in August next year and elections will have to be held within three months of the end of the assembly’s term.

Results of the population census will be available in March and it will take another four months to complete the delimitation of constituencies in light of the results of the census.

Published in The Express Tribune, November 5th, 2022.

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