The prices of petroleum products in Pakistan will go up with the imposition of sales tax, which presently at zero per cent.
Analysts AKD Research Tuesday stated that with the IMF consistently conveying concerns over possible shortfall on account of petroleum development levy (PDL), the government is looking towards a contingency plan by taking up additional taxation measures, for one, imposing full 17 per cent general sales tax (GST) on petroleum products.
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To note, sales tax collection from the previous fiscal year stood Rs107 billion, against Rs235 billion in the preceding fiscal year, reflecting a decrease of 54 per cent.
With petroleum products sales remaining robust during fiscal year 2021-2022, the halving of the collection was due to sales tax being effectively zero during the second half of the fiscal year, since mid-January more specifically.
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Assuming moderate 8 per cent imposition (Rs16-20 per liter) of sales tax on retail fuel products, the government could fetch additional around Rs30 billion revenue monthly at these rates.
Furthermore, the government is likely to take a major hit in the non-tax revenue department as well i.e. PDL as retail offtakes have continued to decline during first four months of the current fiscal year, down 22 per cent year on year (YoY).
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Total collection during the four months were estimated at Rs115 billion against the budgeted target of Rs250 billion. To note, annual PDL collection target stands at Rs750 billion (Rs62.5 billion per month).
Assuming unchanged trends in POL offtakes and similar rates, total PDL collections will end the current fiscal year at Rs350 billion, an overall shortfall of Rs400 billion.
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The analysts further said that assuming the government pushes through by imposing further levies/taxes, although inflationary, this target may be more achievable now compared to five months ago, as falling global oil/petroleum prices has given the authorities more space to work with without severely hurting end consumers.
