OCAC raises concerns over continued GST exemption on petroleum products

KARACHI: The Oil Companies Advisory Council (OCAC) has expressed serious concern and strongly protested the continuation of the General Sales Tax (GST) exemption on petroleum products in the recently announced Finance Bill.

“While we acknowledge the government’s interim relief by allowing recovery of the GST impact through the inland freight equalisation margin (IFEM) effective May 16, 2025, this remains a temporary measure with inherent implications,” the OCAC said in a letter to the petroleum minister.

The council noted that the continued GST exemption on petrol, high-speed diesel (HSD), kerosene and light diesel oil (LDO) -- despite repeated representations from the industry and the minister’s personal commitment during a recent visit to Karachi to have the exemption withdrawn -- demonstrates a lack of recognition of the financial and operational strain this issue places on the downstream oil sector.

“It threatens the viability of businesses, undermines investor confidence and runs counter to the broader objectives of the Pakistan Brownfield Oil Refining Policy, 2023,” the OCAC said.It strongly urged the immediate withdrawal of the GST exemption on petroleum products and recommended replacing it with a sales tax mechanism that allows for full input tax adjustments. “This is the only durable and equitable solution that will restore financial stability, tax neutrality and regulatory clarity to the sector -- failing which, a $6 billion investment under the Brownfield Refining Policy is at serious risk,” the letter warned.