ISLAMABAD: The Special Investment Facilitation Council (SIFC) has instructed authorities to revise the Brownfield Refinery Policy 2023 by September 31 to address the deadlock on the sales tax exemption issue, which has stalled $6 billion worth of refinery upgrade projects in Pakistan.
According to minutes from the SIFC Executive Committee meeting held on June 18 and released on July 1, the Secretary of Petroleum is tasked with communicating final, non-extendable timelines for resolving the sales tax exemption dispute with relevant stakeholders.
If the issue remains unresolved by the deadline, the SIFC will revise the policy within three months to introduce fiscal incentives to make the projects financially viable.
The International Monetary Fund (IMF) previously rejected the government’s proposals to restore the zero-rated status for petroleum products and to impose a 10% sales tax, citing concerns over the Federal Board of Revenue’s (FBR) capacity to enforce tax laws, referencing past issues such as under-invoicing in solar panel imports.
The ongoing deadlock threatens to derail investment plans worth $6 billion in Pakistan’s refining sector. Refineries argue that the sales tax exemption introduced in the FY25 Finance Bill has left crude oil imports ineligible for sales tax adjustments, rendering upgrade projects economically unfeasible and significantly lowering internal rates of return (IRRs).
Industry stakeholders further warn that the current tax policy undermines a $1.6 billion incentive package committed by the government over seven years to support the refinery upgrades.
Earlier, refinery CEOs had urged both the Petroleum and Finance Ministries to resolve the sales tax issue in the FY26 budget and requested tax policy stability for seven years to enable long-term investments.
While the tax issue remains unresolved, Petroleum Minister Ali Pervaiz Malik secured temporary relief through an Economic Coordination Committee (ECC) decision to increase the Inland Freight Equalisation Margin (IFEM) by Rs1.87 per litre for 12 months. This measure aims to offset an estimated Rs34 billion in losses for refineries and oil marketing companies (OMCs) through June 2025.
However, stakeholders emphasise that only a permanent tax solution will unlock the investment required for upgrading the refineries.
In a separate development, the SIFC has approved an agreement between Sui Southern Gas Company (SSGC) and Jamshoro Joint Venture Limited (JJVL) to restart the JJVL LPG-NGL extraction plant, which has been idle since June 2020.
The plant is expected to be operational by July 31, 2025, under a new rate determined by the Oil and Gas Regulatory Authority (OGRA).
