Islamabad, Nov 22: The cost of MS Petrol, High-Speed Diesel (HSD), kerosene oil, and light diesel oil (LDO) is likely to increase by Rs. 45 per liter after the International Monetary Fund (IMF) insisted on Pakistan imposing an 18 percent sales tax on petroleum products. The IMF rejected Pakistan’s proposal to implement a lower 1-2 percent sales tax, demanding a higher rate instead.
While the government has not yet acted on the IMF’s request, this position has threatened the $5-6 billion upgrade projects under the Brownfield Refinery Policy 2023. Local refineries have raised concerns that the shift from a zero-rated sales tax to exempt status has led to higher operational costs, canceled a $1.65 billion incentive package, and resulted in an anticipated loss of $1.152 billion. They also warn of a $1 billion annual foreign exchange loss due to delays in upgrades.
Additionally, the IMF has suggested imposing a 15 percent sales tax on essential items like food, but the government has not made further comments on this proposal.
In response, the government is considering reducing the petroleum levy by Rs. 45 per liter, from Rs. 60, and introducing an 18 percent sales tax instead. The IMF has raised no objections to this adjustment, as long as it helps meet the revenue targets agreed upon.
