As the prices of oil prices were to be decreased by the start of next year, the federal government on Tuesday increased sales tax on petroleum products by five per cent effectively depriving consumers of an estimated Rs 5 billion worth of relief following the fall of crude oil prices in the international market.
The increase in GST on some petroleum products was announced through a notification issued on Tuesday by the Federal Board of Revenue (FBR) on the advice of the finance ministry.
According to the notification, sales tax will be charged at the rate of 22 instead of 17pc on high-speed diesel oil, light diesel oil, kerosene, and motor spirit including HOBC. The notification shall take effect from Jan 1, 2015.
Crude oil prices have fallen sharply in the international market since late June, losing around 30pc as supplies increase and global demand for oil grows more slowly.
The measure to increase GST on the petroleum products was taken by the government to partially offset a shortfall in revenue of the FBR after the decline of oil prices in the global market.
Sources said the decision was taken after Finance Minister Ishaq Dar held a series of meetings with the ministries of finance and petroleum, Oil and Gas Regulatory Authority (Ogra) and FBR to find ways of retaining some of the reduction in oil prices instead of passing on full benefit to consumers.
Sources say the monthly impact of reduction in oil prices was Rs1-3bn, but the real cause of concern was the government’s loss on account of windfall revenue loss on crude, which normally yielded Rs30-35bn every year as a result of higher international price.