ISLAMABAD: The Federal Board of Revenue (FBR) has clarified reports suggesting that the government had granted a blanket sales tax exemption on petroleum products.
The tax authority emphasized that instead of sales tax, the government has opted to collect revenue through the Petroleum Development Levy (PDL).
In its latest annual report on tax exemptions and concessions, the FBR stated: “In the presence of PDL, sales tax is not applied. Consumers are already contributing through the levy, therefore the notion of an exemption does not arise.” The statement underlines that petroleum products remain a consistent source of indirect taxation despite the change in mechanism.
According to the report, an estimated Rs1.8 trillion was not collected as sales tax on petroleum products during the tax year 2024, compared with Rs1.34 trillion in the preceding year. However, the FBR noted that this shortfall cannot be classified as a formal exemption since the PDL served as a replacement.
Overall, the gross figure for tax exemptions and concessions stood at Rs3.03 trillion in tax year 2024, compared to Rs2.86 trillion in the previous year. Out of this, the portion linked with petroleum products was significantly reduced, bringing the net exemption and concession figure down to Rs1.24 trillion.
The FBR’s clarification seeks to remove confusion surrounding the government’s taxation policy. It stressed that while the structure has shifted from sales tax to PDL, consumers of petroleum products continue to bear a substantial share of revenue generation for the national exchequer.
