Government drops Finance Bill proposals on petroleum levy enforcement, recovery mechanism and mandatory reporting for oil companies
ISLAMABAD: The federal government has withdrawn a series of proposed legal amendments relating to the collection and enforcement of the Petroleum Levy and Climate Support Levy by Oil Marketing Companies (OMCs), refineries and other petroleum sector licensees under the Finance Act, 2026.
The proposals were originally introduced through the Finance Bill, 2026 to amend the Petroleum Products (Petroleum Levy and Climate Support Levy) Ordinance, 1961. However, following parliamentary deliberations, the amendments were omitted from the final Finance Act, allowing the existing legal framework to remain in force.
Proposed definitions withdrawn
Among the key proposals dropped was a plan to replace the existing definitions of “company” and “refinery”, which currently refer to entities specified in the Second and Fourth Schedules of the Ordinance.
Under the proposed amendments, a “company” would have been redefined as an oil marketing company, including any person engaged in manufacturing, refining or reclaiming lubricating oil from used lubricants under a licence issued by the Oil and Gas Regulatory Authority (OGRA).
A “refinery” was also proposed to be defined as any industrial facility engaged in processing crude oil into petroleum products.
The Finance Bill further sought to introduce a separate definition of an oil marketing company as an entity, excluding lubricant marketing companies, involved in purchasing petroleum products from refineries, blending plants or foreign suppliers for sale and distribution through dealers, agents, retail outlets and filling stations.
As a consequence of these revised definitions, the government had proposed removing the existing Second and Fourth Schedules of the Ordinance. These changes have now been abandoned.
Levy payment not linked to licences
Another proposal excluded from the Finance Act would have made the payment of Petroleum Levy and Climate Support Levy a mandatory condition for obtaining and maintaining licences issued by OGRA to oil marketing companies, refineries and other petroleum sector licensees.
Had the proposal been approved, compliance with levy obligations would have become a statutory requirement for continuing operations under an OGRA licence.
Late payment surcharge dropped
The Finance Bill also proposed introducing a surcharge on companies, refineries and licensees failing to pay Petroleum Levy or Climate Support Levy within the prescribed timelines.
For locally produced petroleum products, the levy was to be paid alongside sales tax or federal excise returns, while importers would have been required to pay the levy at the time of customs clearance.
The proposed surcharge was to be calculated under Section 40D of the Public Finance Management Act, 2019, based on the monthly weighted financing cost applicable to the outstanding amount.
These provisions were not included in the final legislation.
Recovery mechanism not approved
The government also withdrew a proposal to establish a dedicated recovery mechanism for unpaid petroleum levies.
The Finance Bill had proposed empowering the relevant department to recover unpaid Petroleum Levy and Climate Support Levy after 90 days of default or request the Commissioner Inland Revenue to recover the outstanding amount in the same manner as income tax arrears.
The proposed amendments further stated that the Commissioner Inland Revenue would not have been permitted to grant payment extensions or allow instalment-based settlements.
In addition, the Commissioner would have been required to submit fortnightly recovery reports to the Finance and Petroleum Divisions, while procedural irregularities in recovery proceedings would not have been challengeable before any court or tribunal.
The proposed recovery framework was also intended to apply retrospectively to outstanding levy liabilities arising before the enactment of the Finance Act, 2026.
All of these provisions have now been omitted.
Mandatory reporting requirements shelved
The Finance Bill had also proposed a comprehensive reporting regime requiring every oil marketing company, refinery and licensee to submit monthly statements detailing Petroleum Levy and Climate Support Levy payments, supported by documentary evidence, including sales invoices filed with the Federal Board of Revenue (FBR).
In addition, companies would have been required to obtain annual audit certificates from firms registered with the Audit Oversight Board to verify the accuracy of levy calculations and payments, with the audit costs borne by the respective companies.
These compliance and reporting requirements were also excluded from the Finance Act.
Existing framework remains unchanged
The withdrawal of the proposed amendments means that the existing provisions governing the collection, recovery and reporting of Petroleum Levy and Climate Support Levy will continue without alteration.
Industry observers say the government’s decision provides regulatory continuity for the petroleum sector while avoiding the introduction of new compliance obligations that had generated concerns among oil marketing companies and refinery operators during the parliamentary review of the Finance Bill.
