Petrol and HSD: Adjustment of ST & PL enable government to keep prices unchanged

Adjusting sales tax (ST) on petrol and HSD upward and reducing the petroleum levy (PL) on HSD enabled the government to keep prices of both products unchanged for July.
Sales tax on Motor Spirit (MS) and HSD was raised from 13 percent to 17 percent effective 1 July, 2019 while the standard rate of sales tax (17 percent) on Kerosene and Light Diesel Oil (LDO) was unchanged for July, 2019. A senior FBR official maintained that the upward adjustment of sales tax would have a revenue impact of Rs 2-3 billion in July 2019.
In monthly review for July, petroleum levy has been increased on MS from Rs 13.76 per litre in June to Rs 15 per litre and decreased from 18 per litre to Rs 16.3 per litre on HSD. The total revenue impact of this measure was not available with FBR officials.
When asked why the need for this adjustment when prices were kept unchanged sources in the Federal Board of Revenue (FBR) told Business Recorder on condition of anonymity that any increase in international petrol prices, expected by markets due to escalating tensions between the US and Iran, would increase the government's revenue while petroleum levy collections, at a fixed rate, would only rise if total sales rise.
Dr Ashfaque Hasan Khan, Member Economic Advisory Council (EAC), told Business Recorder that the FBR increased sales tax from 13 percent to standard rate of 17 percent on MS and HSD keeping in view its policy to impose a uniform rate of sales tax across the board. He pointed out that sales tax is a divisible pool tax and shared between the federal and provincial governments under the National Finance Commission (NFC) award. Petroleum levy on the other hand goes to the federal government alone.
For an administration complaining about unfair balance distribution of resources between the federal government and provinces to adjust sales tax upward and reduce petroleum levy is inexplicable, so stated several FBR officials on condition of anonymity. The press release issued by the International Monetary Fund after reaching staff level agreement with Pakistan refers to the imbalance in the NFC award: "To improve fiscal management the authorities will engage provincial governments on exploring options to rebalance current arrangements in the context of the forthcoming National Financial Commission."
Ogra recommended a 77 paisa decrease in petrol prices for the month of July, Rs 2.30 increase in high speed diesel, 26 paisa increase in the price of light diesel and Rs 2.26 decrease in kerosene. The Ministry of Finance announced that the government decided not to increase the price of petroleum products for the month of July.