KARACHI/ISLAMABAD: The Petroleum Division has convened an important meeting with oil sector stakeholders to discuss the challenges posed by sales tax exemptions on petroleum products. This meeting, taking place today (Tuesday), follows directives from the Special Investment Facilitation Council (SIFC) urging swift action on refinery upgradation agreements.
Representatives from refineries, oil marketing companies, the Oil Companies Advisory Council (OCAC), and the Federal Board of Revenue (FBR) are participating in the discussions. The focus is on resolving the tax exemption issue, which has delayed significant infrastructure investments in refinery upgradations.
Industry representatives remain sceptical, arguing that addressing the exemption requires a mini-budget, a move considered improbable in the current economic and political climate. Critics also note that alternative solutions, such as revising the inland freight equalisation margin (IFEM), are being overlooked.
“The government’s reluctance to impose sales tax on petroleum products, fearing political backlash, has stalled critical projects and increased operational costs,” said Adil Khattak, Chairperson of OCAC.
The exemption, introduced under the Finance Act 2024, has rendered refinery upgrades and operations financially unsustainable by limiting input tax claims. According to the OCAC, this policy increases industry costs by approximately Rs. 25 billion annually and risks derailing $5-6 billion investments under the Brownfield Refineries Upgradation Policy.
Despite multiple directives from the SIFC and the Prime Minister’s Office to resolve the matter, no concrete actions have been taken. Industry leaders warn that continued delays will erode profitability, jeopardise infrastructure projects, and threaten the sustainability of Pakistan’s oil sector.
Story by Tanveer Malik & Khalid Mustafa
