Sources claimed that International Monetary Fund (IMF) demanded the imposition of 18 percent sales tax on petroleum products.

If government accepts this demand, the petrol price could go up by Rs45 per litre.

The global lender rejected Pakistan’s proposal to impose a 1-2 percent sales tax on petroleum products and demanded levying 18 percent sales tax on petroleum products.

The government has decided to avoid implementing the IMF’s demand so far. However, the lender’s stance has jeopardized the $5-6 billion upgrade projects under the Brownfield Refinery Policy 2023.

The IMF also proposed imposing a 15 percent sales tax on essential items including food. Yet, the federal government avoid paying heed to impose sales tax on grocery or food items.

According to sources, the government is mulling over decreasing the petroleum levy by Rs45 per litre from Rs60 and imposing an equivalent 18 percent sales tax. The IMF has not raised objection over this adjustment provided that it ensures the agreed revenue target.

Local refineries have expressed concerns that the proposed change from zero-rated to exempt status for sales tax on petroleum products has led to increased operational and project costs, nullifying the $1.65 billion incentive package under the ESCROW account.

They anticipate a significant loss of $1.152 billion due to the exemption s impact and warn of an additional $1 billion annual foreign exchange loss resulting from delayed upgrades.