SIFC prioritises brownfield refinery upgrades amid tax deadlock

The Special Investment Facilitation Council (SIFC) has placed brownfield refinery upgrades at the top of its agenda, signalling renewed government focus on modernising Pakistan’s existing refining capacity, The News reported. 

Officials told refinery executives during a review meeting that SIFC would extend full support to remove obstacles delaying upgrade projects. 

Refinery upgradation projects have remained stalled due to a prolonged dispute over sales tax treatment of petroleum products. The deadlock intensified after key fuels were shifted from zero-rated status to sales tax exemption, a move that removed refineries’ ability to adjust input taxes on imported machinery and services required for upgrades.

Industry sources said the resulting increase in capital and operating costs has rendered major investments financially unviable. While the government proposed reintroducing sales tax at a reduced rate to allow input tax recovery without raising consumer prices, the International Monetary Fund has opposed the move, arguing it would weaken revenue mobilisation.

As uncertainty persists, refineries have delayed financial closure and procurement, raising concerns over future compliance with fuel quality and environmental standards. Without timely upgrades, Pakistan may face higher reliance on imported refined fuels, adding pressure on foreign exchange reserves.