ISLAMABAD: The government has declared another reduction in fuel prices and imposed a further five percent general sales tax. The cut in oil prices is expected to help the government earn an additional Rs.12 billion in revenue alone. In January, the government was able to collect Rs.16 billion after imposing 5pc GST on petroleum products, above the normal GST rate of 17 percent. The new rate is 27 percent. One would support this increase in taxation, if the money was going into ending circular debt or new projects.
The billions that Dar has predicted due to the increase in taxes is to cover losses. The government says that revenues on crude oil priced higher than $60 on the international market are shared between the government and the companies, but when prices fall below $60, the government’s share goes down to zero. To cover this loss the government decided to increase the GST on petroleum products. Justifying the additional GST, Mr Dar said that several countries including India, took such measures to arrest the impact of declining oil prices on revenue collection. But was an increase in the sale of oil not anticipated? Sale has increased, and people have even begun to switch from gas to petrol. Falling revenues would be matched by rising sales. But have no fear, Dar knows his economics.
