FBR to Lower Sales Tax on Petroleum Products
Federal Board of Revenue (FBR) is considering imposing a lower rate of sales tax between 3 to 5 percent on petroleum products to overcome the shortfall in revenue in 2024-25.
Read More: FBR Increases Sales Tax on Local and Imported Tea
Budget preparation for 2024-25
Budget preparation for 2024-25 proposal to impose the standard rate of 18 percent sales tax on POL products has been rejected by the prime minister as this is inflationary and having an immediate impact on the general public.
Revenue Generation
Sources close to ProPakistani said that a reduction in the sales tax rate on petroleum products, a proposal which, sources revealed, is still under contemplation by FBR for generating revenues in the remaining period of 2024-25, has not yet finalised.
IMF Pressure: FBR to Lower Sales Tax on Petroleum Products
The IMF has been informed that the FBR sees no pressure on the government to enforce contingency revenue measures by the end of first quarter of 2024-25.
The implementation of the contingency revenue measures at this stage of the fiscal year is too early, it has been informed by FBR to IMF.
Finance Act 2024: FBR to Lower Sales Tax on Petroleum Products
Under the Finance Act 2024, motor spirit (petrol), high-speed diesel, kerosene and light diesel oil (LDO) have been shifted from taxable supplies to exempt from levy of sales tax.
According to the sources, this new status would bring positive revenue impact of around Rs 18-20 billion.
The refineries/oil marketing companies are requesting the government to change the said amendment made through the Finance Act 2024.
Resultantly, up to 80-85 percent of the input tax will be disallowed resulting in a substantial increase in the operating cost as well as project cost, as per refineries.
The last Tax Expenditure Report-2024 revealed that sales tax exemption on petroleum products resulted in a revenue loss of Rs. 1.25 trillion for FBR during the year 2022-23.
POL products: FBR to Lower Sales Tax on Petroleum Products
It clearly reflects that specifically within the large tax expenditure availing sector of POL products four major items are there namely MS (Petrol), High-Speed Diesel Oil, Kerosene and Light Diesel Oil having the maximum share of Sales Tax Expenditure. And all these four items depicted a growth of 98.66 percent.
All four items share were 43.99 percent of total sales tax expenditure.
On the other hand, however it is pertinent to mention that increase of these four major POL items said to be above has been worked out with regard to sales tax expenditure calculated for 2021-22 over the period of five months as against sales tax expenditure calculated over a period of twelve months for 2022-23 owing to the reason that these four items aforementioned were zero-rated from February 1, 2022, vide SRO 321(I)/2022, dated 01-03-2022.
As a result, the sales tax expenditure for five months period (Feb-June) of 2021-22, incurred on the above said four POL products was reported as Rs. 633.0 billion while the sales tax expenditure for the whole year (12 months) period (July-June) of 2022-23, incurred on the said four POL products is reported as Rs. 1,257.50 billion.
FBR to Lower Sales Tax on Petroleum Products
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Note: The information above might not be accepted 100%. Please verify from your own sources. We will not be responsible for any kind of loss due to our content.
For more news, please visit Munafa Marketing.
