Petroleum Dealers Win Tax Dispute with Government

Petroleum Dealers Win Tax Dispute with Government

Karachi, July 7, 2024 – Pakistan’s petroleum dealers have successfully convinced the government to reverse a new tax regulation after arguing it amounted to double taxation.

The Federal Board of Revenue (FBR) issued a clarification on July 7, 2024, stating that withholding tax under section 236H of the Income Tax Ordinance would not apply to gas station owners and retailers. This decision came after strong opposition from the Pakistan Petroleum Dealers Association (PPDA).

Misinterpreted Law Created Unnecessary Burden

The dispute stemmed from a provision in the recently passed Finance Act 2024-25, which many interpreted as imposing a 0.5% advance turnover tax on petroleum retailers. The PPDA argued that this levy was redundant as gas stations already pay an advance fixed withholding tax of Rs 1.04 per liter, which serves as their final income tax.

“The new tax was a misinterpretation of the law and would have resulted in double taxation for our members,” said PPDA spokesperson Hassan Shah. He emphasized that gas station profit margins are already tight, and the additional tax burden would have threatened the viability of many businesses.

PPDA Successfully Lobbies for Relief

The PPDA delegation held extensive discussions with high-ranking government officials, including the Minister of State for Finance & Revenue, the FBR Chairman, and the Petroleum Secretary. They presented their case, explaining how the new turnover tax would cripple the retail fuel industry, especially considering the current economic climate with high inflation.

Hassan Shah highlighted the positive outcome of these meetings, stating, “The government officials were receptive to our arguments and understood the difficulties we face.” He added that around 95% of petroleum dealers across Pakistan distanced themselves from a strike call advocated by a small Karachi-based faction known for its controversial ties to oil marketing companies.

Positive Resolution Through Dialogue

The FBR’s official memorandum issued by Secretary Income Tax Policy Muhammad Sajid Ahmad confirmed the PPDA’s position. The document clarified that section 236H does not apply to gas station owners as their income falls under the Final Tax Regime.

“We are glad that the issue has been resolved amicably through dialogue,” concluded Shah. “This serves as a reminder that open communication is always preferable to resorting to disruptive protests.” The PPDA remains committed to working with the government to ensure fair treatment for its members in the future.