ISLAMABAD: The country’s oil refineries have sought Finance Minister’s intervention for removal of General Sales Tax (GST) exemption on petroleum products.
In a letter to Finance Minister, Senator Muhammad Aurangzeb, top bosses of five refineries i.e. Attock Refinery Limited, Cnergyico PK Limited, National Refinery Limited, Pakistan Refinery Limited and Pak-Arab Refinery Limited has drawn the attention to the top challenge currently being faced by the oil refining industry.
According to the refineries, the Finance Act 2024 changed the sales tax status of petroleum products (petrol, high speed diesel, kerosene oil and light diesel Oil) from zero rated to exempt supplies, which has led to disallowance of input sales tax claims, causing a substantial increase in operational and capital costs of the local refineries.
Refineries are of the view that the change in sales tax law is severely impacting the financial viability of their planned upgrade projects, infrastructure development, and day-to-day operations, adding that continuation of this exemption will result in significant erosion in profitability and severe financial strain on the oil refining industry.
“This issue has jeopardized the progress and sustainability of crucial capital-intensive projects thus nullifying the objectives of the Brownfield Refining Upgradation Policy which was approved by the government in August 2023,” said top bosses of refineries.
Refineries have also apprised the Finance Minister that despite continuous follow-ups over the past seven months and active coordination with —the Ministry of Energy – Petroleum Division (MEPD), Oil and Gas Regulatory Authority (OGRA), Federal Board of Revenue (FBR), the issue remains unresolved.
“This matter is critical for the survival of the oil refining industry in Pakistan, and its prolonged delay is causing significant challenges,” they said, requesting urgent intervention of Finance Minister to facilitate an amicable and swift resolution. The oil refining industry has also requested for an urgent meeting with the Finance Minister to discuss and resolve this critical issue.
