FBR’s tax revenue collection from oil sector up 38pc in July-March

KARACHI: Federal Board of Revenue’s (FBR) revenue from oil sector rose 38 percent to Rs108.40 billion during the first nine months of the current fiscal year of 2018 due to higher sales tax rates and better corporate earnings, officials said on Friday.

FBR collected Rs78.60 billion from oil companies in the July-March period of the last fiscal year.

Tax officials said higher sales tax rates on petroleum, oil and lubricants (POL) products were the major contributors to the revenue collection during the period. FBR collected Rs89.24 billion on account of sales tax on petroleum products in July-March, depicting a sharp rise of 47 percent as compared to Rs60.64 billion a year earlier.

The officials said lower oil prices, in the past, reduced sales tax collection despite higher rates. Oil prices started rebounding during the current fiscal year, subsequently pushing up tax revenue, they added.

FBR levies sales taxes of 21.5 and 27.5 percent on motor spirit and high speed diesel, respectively. The rates are higher than the normal sales tax rate of 17 percent, and will remain applicable till April 30. Sales tax on kerosene and light diesel oil are, however, 17 percent and 16.5 percent, respectively.

The officials said the tax collection was only from domestic supplies of POL products by oil exploration and marketing companies and refineries.

FBR further collected Rs17 billion in lieu of income tax from oil sector during the first nine months of the current fiscal year, up 16 percent over the same period a year ago.

Growing oil sales improved corporate earnings of refineries, oil exploration and marketing companies during the period.

Sales of oil marketing companies rose 10 percent during the first nine months of the current fiscal year. Motor spirit consumption increased to 5.44 million tons during July-March 2017/18 as compared to 4.93 million tons in the corresponding period of the last year. Likewise, sales of high speed diesel rose 10 percent to 6.73 million tons.

Analyst Waqas Ahmed at Taurus Securities said strong demand of automobiles and higher infrastructure development activities boosted consumption of retail fuels.

“During 9MFY18, industry volume, ex-furnace oil, grew 10 percent year-on-year to 12.95 million tons on account of impressive growth in automobiles and improving industrial activity,” Ahmed added.

FBR’s federal excise duty collection, however, sharply declined 36 percent to Rs2.11 billion during the first nine months of the current fiscal year. Government policy to reduce duty rates adversely hampered revenue collection from the oil sector, sources said.