The prices of MS Petrol, High-Speed Diesel (HSD), kerosene oil, and light diesel oil (LDO) in Pakistan are likely to increase by Rs. 45 per liter following the International Monetary Fund’s (IMF) demand for an 18 percent sales tax on petroleum products.
The IMF has rejected Pakistan’s proposal to impose a lower 1-2 percent sales tax, insisting instead on the higher rate, as reported by a national daily. Although the government has not yet implemented the IMF’s demand, the lender’s stance has put at risk the $5-6 billion upgrade projects under the Brownfield Refinery Policy 2023.
Local refineries have expressed concerns that the proposed shift from a zero-rated to an exempt status for sales tax on petroleum products has already escalated operational and project costs. This change has effectively nullified a $1.65 billion incentive package under the ESCROW account. Refineries anticipate a $1.152 billion loss due to the exemption’s impact and warn of a $1 billion annual foreign exchange loss from delayed upgrades.
Additionally, the IMF has suggested a 15 percent sales tax on essential items like food, but the federal government has not yet addressed this proposal in detail.
In response, the government is considering reducing the petroleum levy from Rs. 60 to Rs. 45 per liter and imposing an equivalent 18 percent sales tax. The IMF has not objected to this adjustment, provided it meets the agreed revenue targets
