Decrease in sales tax on petroleum products may cause Rs60 billion in losses

To shield the end consumer from the full impact of rising oil prices, the government has been reducing sales tax which according to tax authorities estimates a sharp decrease of 46 percent in revenue collection in November 2018

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KARACHI: The government absorption in the shape of reducing sales taxes on petroleum product is likely to cause Rs60 billion in losses during the first half (July-Dec) of the current financial year 2018-19.

To shield the end consumer from the full impact of rising oil prices, the government has been reducing sales tax which according to tax authorities estimates a sharp decrease of 46 percent in revenue collection in November 2018, reports The News.

According to sources, the projections put forth by the Large Taxpayers Unit (LTU) Karachi showed the continuing decrease in sales tax on two main fuels, including motor and high-speed diesel (HSD) could bring the collection under its head down to Rs15.7 billion in November from Rs29 billion in the corresponding month of last year.

Moreover, sources believe the decrease sales tax rates on petroleum oil and lubricant (POL) production were becoming a drag on revenue collection and LTU Karachi projected the likely revenue loss to touch a gigantic Rs60 billion during July-December of FY19.

The major source of revenue collection for the government have been POL products, however, sources say due to the historically low sales rates on POL, it will become very demanding for the tax authorities to attain the annual revenue collection target.

Since the beginning of FY19, the sales tax rates on motor spirit (petrol) have suffered a continuous fall. The sales tax on petrol fell 16 percent in July compared to the preceding month of FY17.

Sales tax on petrol was reduced by 30 percent, 22 percent and 63 percent in August, September and October.

And sales tax decrease for motor spirit was projected at 61 percent for November, although sales tax on HSD was increased by nine percent, 0.44 percent and 7.5 percent for July, August and September compared to the same months a year back.

But the authorities took the decision of decreasing sales tax on HSD by 15.54 percent year-on-year in October and 39.56 percent in November,

The sales tax rates on motor spirit and HSD for November were fixed at 4.21 and 12 percent by the government.

 

 

 

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