ISLAMABAD, AUGUST 6: The zero-rating of petroleum items into sales tax exemption in the budget (2024–25) will result in an annual savings of roughly Rs. 20 billion for the government.
The Finance Act 2024 has modified the status of Motor Spirit (Petrol), High-Speed Diesel, Kerosene, and Light Diesel Oil (LDO) from taxable to exempt supplies in relation to sales tax.
The status change will result in an increase in revenue of between Rs. 18 and 20 billion.
Due to a shift in the status of petroleum goods from zero-rating sales tax to sales tax exemption, the industry is no longer able to issue refunds. The oil business was receiving refunds prior to the budget for 2024–2025 because petroleum goods were exempt from sales tax. Refineries and oil marketing businesses are seeking that the government revise the Finance Act 2024, which made the aforementioned adjustment. As a result, according to refineries, up to 80–85% of the input tax will be prohibited, which will significantly raise project and operating costs.
The idea to tax petroleum goods at a reduced rate of three to five percent is now being examined by the Federal Board of Revenue (FBR) in order to determine its expected revenue impact.
The Prime Minister Shehbaz Sharif rejected the idea to establish a standard rate of 18 percent sales tax on POL items during the budget planning process for 2024–2025 since it would be inflationary and have an immediate effect on the public.
