FBR estimates Rs24 billion in revenue from POL products

KARACHI: The Federal Board of Revenue (FBR) has estimated Rs24 billion in additional revenue from petroleum products during the second half of the current fiscal year of 2018/19 as a result of upward revision in sales tax rates.

Sources in FBR on Thursday said tax authorities estimated around four billion rupees a month in additional revenue with the increase in sales tax on petroleum products.

Government increased sales tax on petroleum products for January after massive shortfall in revenue collection.

Sales tax was increased to flat 17 percent on all basic petroleum products as opposed to eight percent on petrol, 13 percent (high speed diesel), two percent (kerosene) and 0.5 percent (light diesel oil) in December last year.

Lower sales tax rates negatively impacted the revenue collection during the first half. The FBR is facing around Rs170 billion in shortfall in view of Rs4.435 trillion revenue collection target for 2018/19. The shortfall was mainly due to reduction in sales tax on petroleum products. The FBR sources said the additional revenue estimates are based on consumption trends. Downward consumption trend would hurt revenue, they said.

Sales of petroleum products fell 21 percent to 20.39 million tons in 2018. High speed diesel sale decreased 10 percent to eight million tons. Sale of petrol, however, rose three percent to 7.28 million tons last year.

Oil sales sharply fell 32 percent to 9.2 million tons during the first half as the government’s shift to alternative fuel for power generation brought furnace oil off-take down. Furnace oil sales steeply declined 67 percent to 1.5 million tons in the July-December period over the corresponding period a year earlier.

The FBR faced Rs80-90 billion shortfall in revenue from petroleum products in the July-December period due to declining sales and tax reduction. The FBR was collecting sales tax of Rs11.80 per litre of petrol when its retail price was Rs81.93 in January 2018 and the sales tax rate was 17 percent. Now, the government increased the sales tax to 17 percent on petrol and FBR is collecting Rs13.20 in sales tax on a litre of petrol as retail price is Rs90.97.

Similarly, on high speed diesel the sales tax rate was 25.25 percent in January 2018. Due to high retail price, the FBR is collecting Rs21.50 as sales tax on a litre of high speed diesel compared with Rs18.2 in January 2018.

The FBR estimated around 18 percent growth or Rs4 billion additional revenue provided that consumption of both the retail fuels remains similar to the December 2018 level. The previous government adopted a mechanism of higher sales tax rates to generate revenue when the international oil prices came down to the lowest level to reach at $28.36/barrel in January 2016. But due to high prices in international market, the previous government reduced the sales tax rates, which continued in the caretaker setup and were even maintained by the present government.