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The Federal Board of Revenue (FBR) is considering further raising sales tax on petroleum products following the decline in international POL prices as there is a shortfall of Rs 9 billion from petroleum sector (domestic stage) during July-August (2015-16) in comparison to the comparable period last year.
Sources told Business Recorder here on Monday that the sales tax collection from petroleum sector at domestic stage stood at Rs 27 billion during July-August (2015-16) against Rs 36 billion in the same period of 2014-15, reflecting a shortfall of Rs 9 billion. Sales tax collection of Rs 27 billion from petroleum sector includes collection from petroleum products and oil marketing companies at local stage during the period under review. The FBR is analysing reasons behind low sales tax collection from petroleum sector at domestic stage during the current fiscal year. One of the major factors responsible for low sales tax collection is decrease in prices of petroleum products. According to a latest report of Goldman Sachs, oil could plunge as low as $20 a barrel amid a glut of production around the world.
Official told this correspondent that the sales tax on POL products is the highest in the history of Pakistan. From September 1, 2015, the FBR increased sales tax from 20 percent to 25.5 percent on Motor Spirit, 17 to 24 percent on HOBC, 20 to 30 percent on Kerosene, 36.5 to 45 percent on High speed diesel oil and on Light diesel oil from 20 to 29.5 percent.
The FBR has estimated revenue to the tune of Rs 6-8 billion from changes in the sales tax rates on POL products from September 1. The increase in sales tax on POL products will offset the negative revenue impact in the wake of declining oil prices. Referring to a report of Tax Reform Commission (TRC), official added that the Commission recommended flat rate of sales tax on petroleum products to sustain revenue from petroleum and products. Petroleum products in Pakistan are subject to price fluctuations as these are linked with international petroleum prices therefore the TRC recommended that sales tax should be charged on the basis of per litre of petrol at flat rate instead of on moving sale price basis. The international import price last year may be taken as a benchmark (in US $ terms) for setting sales tax price per litre at flat rate for the forthcoming year. It also recommended that the price so set shall remain in force for the entire year irrespective of upward or downward movements, TRC added. However, this proposal of TRC was not accepted by the government, they added.

Copyright Business Recorder, 2015

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