Govt raises GST on petroleum products

ISLAMABAD: In order to offset passing on to domestic consumers the full benefit of a nosedive in oil prices on the international market, the government Monday jacked up GST rate on all major petroleum products ranging between 25.5 percent and 45 percent with effect from September 1.
The oil prices have fallen below $40 per barrel on the international market but the government has decided to pass partial benefit on to domestic consumers by raising the GST rate.
The highest ever GST rate was increased for High Speed Diesel (HSD) which was raised from 36.5 percent to 45 percent with effect from September 1.
Although, the decline in oil prices is a good omen for oil importing countries like Pakistan, the tax collection machinery is worried about its negative impact on revenue being the biggest revenue spinner.
Despite raising the GST rate, the FBR’s annual tax collection target will be entering into the danger zone because of declined oil prices.
So far, the FBR high-ups do not agree to this assertion and seem fully confident of achieving the annual tax collection target of Rs3,104 billion. During the recently concluded talks with the IMF, they claimed that the FBR’s target had not been slashed downward and all out efforts would be made to achieve the target.
According to a notification issued by the FBR Monday night, the GST rate on motor spirit was increased to 25.5 percent from 20 percent, on HOBC to 24 percent, on kerosene to 30 percent from 20 percent and on Light Diesel Oil to 29.5 percent from 20 percent. The GST rate for HSD was increased to 45 percent for September 2015.
When contacted, a top official of Finance Division said the government had consciously created a buffer to absorb shocks on account of fluctuating oil prices on the international market.
It will also offset the negative revenue impact in the wake of decline in oil prices that had caused over Rs200 billion loss during the last financial year. The FBR had envisaged tax collection target of Rs2810 billion but it ended up by collecting just Rs2588 billion on June 30, 2015.
The FBR is again vying for highly ambitious tax collection target of Rs3104 billion during the current fiscal year against actual collection of Rs2588 billion for the last financial year.
In first two months of the current fiscal year, the FBR has achieved a nominal growth indicating that the tax machinery will be heading towards revenue shortfall during the current fiscal year.
The FBR has so far collected Rs324 billion during first two months of 2015-16 against Rs312.861 billion in the same period of last fiscal year, reflecting an increase of Rs11.139 billion.
According to the provisional revenue collection figures compiled by the FBR on Monday, the FBR’s net revenue collection for August 2015 stood at Rs181 billion against Rs178.9 billion in the same period last fiscal, showing an increase of only 2 percent.
During the month of August 2015, the FBR has paid refunds of Rs5 billion against Rs5.6 billion paid in the same period previous year.
The FBR had estimated to pay refunds of Rs30 billion during this period, but the actual amount paid is Rs5 billion.