Karachi, April 18, 2026 – Pakistan’s Federal Board of Revenue (FBR) said on Saturday that withholding income tax collection from petroleum products rose by 163% over the past five years, driven largely by higher fuel prices and increased consumption.
According to official data released by the FBR, total withholding tax collected from petroleum products reached Rs20 billion in fiscal year 2024-25, compared with Rs7.59 billion in fiscal year 2020-21.
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The FBR collects withholding income tax under Section 156A of the Income Tax Ordinance, 2001, at a rate of 10% on petroleum product sales. The tax is deducted from commissions or discounts provided to petrol pump operators by suppliers, and is treated as a final tax on the income derived from such transactions.
Under the law, every person selling petroleum products to a petrol pump operator is required to deduct tax from the operator’s commission at the prescribed rate, with the liability considered settled at the source.
FBR data showed a steady year-on-year increase in collections. Revenue rose to Rs10.31 billion in FY2021-22, climbed further to Rs11.82 billion in FY2022-23, and reached Rs14.56 billion in FY2023-24 before peaking at Rs20 billion in the latest fiscal year.
Officials said the sustained growth reflects both higher petroleum pricing in the domestic market and improved tax compliance within the fuel distribution chain. Rising global oil prices in recent years have also contributed to increased taxable transaction values, boosting withholding tax inflows.
Tax authorities have expanded monitoring mechanisms in the petroleum sector to ensure accurate deduction and reporting at the retail and distribution levels.
Analysts said the petroleum sector remains a significant contributor to Pakistan’s indirect tax base, particularly through withholding mechanisms that allow for efficient collection at source.
The FBR said it continues to focus on broadening the tax base and strengthening enforcement measures to improve overall revenue performance.