By Staff Reporter
ISLAMABAD: Inflationary fires are set to get worse as the government is weighing slapping Rs10/litre Petroleum Levy on fuels from July 1 as the IMF insists it is critical to cut a staff-level deal for the resumption of a suspended loan, Independent Pakistan has learnt.
However, there is no possibility of imposition of General Sales Tax (GST) on petroleum products from July 2022 so it will be kept at zero for the time being.
In an interesting but well-thought-out strategy devised by the economic wizards of the incumbent regime, the Ministry of Finance is going to recommend Prime Minister Shehbaz Sharif for imposing a Petroleum Levy of Rs10/litre on petroleum products from the next month. The government preferred to collect Petroleum Levy instead of General Sales Tax (GST) mainly because of obvious reasons as the federal government wants a collection of nontax revenues through the levy, which does not become part of the Federal Divisible Pool (FDP) under National Finance Commission (NFC) Award.
The Ministry of Finance proposed an increased limit of petroleum levy to the tune of Rs50/litre, but it cannot collect the maximum limit at a time when the prices of petroleum products are on the rise. The petroleum prices had gone up by over Rs100/litre since May 27, 2022.
The government hiked petroleum prices and abolished fuel subsidies. The IMF is now asking the government to collect taxes on petroleum products.
Keeping the IMF demands in view, the government is exploring options to collect petroleum levy in a phased manner next fiscal year from July 2022. If the oil prices decrease in the coming weeks and months then the government will have more space to hike petroleum levy in the coming reviews to adjust petroleum prices. Currently, the government is charging zero amount through GST on petroleum products and for the time being it will be kept at zero for time being until the international prices drastically decrease.
Analysts believe the Petroleum Levy target of Rs750 billion for the next fiscal year is unworkable.
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