Oil industry seeks abolition of super tax, sales tax exemption in FY26 budget

ISLAMABAD: The oil industry has submitted its budgetary proposal for the fiscal year 2025-26 with FBR seeking abolishment of super tax, sales tax exemption and final tax regime on exports of petroleum products.

In a three-page letter sent to the FBR chairman on April 7, 2025, the Oil Companies Advisory Council (OCAC), asked for the removal of sales tax exemption. It said the Finance Act 2024 had introduced exemption of sales tax on Motor Spirit (Petrol), High Speed Diesel Oil, Kerosene, and Light Diesel Oil.

The OCAC is of the view that since their pricing is regulated, the disallowance of input tax has increased the operating costs and the cost of the industry’s infrastructure development.

The impact for FY 2025 is expected to be more than Rs18 billion, recommending that petroleum products should be taxable.

Seeking abolishment of Super Tax, the OCAC said the Super Tax, originally introduced as a one-time levy, has been extended well beyond its initial scope.

In light of the current economic climate and the need to support documented and responsible businesses, it strongly recommended abolishing the Super Tax for tax year 2025-26.

The OCAC has also recommended that the Minimum Tax applicable on Refineries and OMCS should be reduced to 0.25pc and abolished in the subsequent year.

The Oil Companies Advisory Council has also sought to reinstate the Commissioner’s power to issue Exemption Certificates.