November 28, 2021

Petroleum levy to direct benefit to federal govt

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Petroleum levy to direct benefit to federal govt

Customs duty and sales tax are distributable revenue among provinces

KARACHI, Nov 23,2021 The federal government will be main beneficiary of recently imposed Petroleum Development Levy and will earn Rs 560 billion from petroleum products in the next seven months.

PTI government has taken this step to meet the revenue target under IMF conditions, as described by the PM’s advisor on financial affairs.

Levy on petrol to be increased by Rs 30: Shaukat Tarin

The reduction in sales tax and increase in petroleum levy will be a direct benefit to the federal government. The collection of customs duty and sales tax are among the distributable revenue under the constitution while PDL is only a federal tax.

According to the details, in the budget of the current financial year, the government had set a target of Rs 610 billion for collection of PDL from petroleum products but so far the government has managed to collect about Rs 50 billion from this item.

In talks with the IMF, the federal government has been asked to meet the PDL target, after which Shaukat Tarin, finance adviser to Prime Minister Imran Khan, announced that the petroleum levy would be raised to Rs 30. It has been said that it will be increased by about Rs 5 per month. Thus, in a few months, the PDL on petrol will be increased by Rs 20 on petrol and Rs 22 on diesel. At present, the government is charging Rs 10 per liter on petrol and Rs 8 per liter on diesel.  

It may be noted that petroleum products are a major source of direct tax collection. The government also collects sales tax, customs duty on petroleum products, along with oil marketing margin and dealer’s commission.

This will directly benefit the federal government so the government is increasing the PDL by reducing the sales tax.

Sources said that the IMF had set conditions for increase in electricity and gas tariffs along with elimination of agricultural sector subsidy to increase the revenue of the federal government on which the government compromised and accepted the condition of increase in PDL.