Pakistan Oil Sector Faces Rs 35 Billion Loss Due to Tax Exemption

Pakistan’s oil industry is projected to lose Rs 35 billion this fiscal year because of a sales tax exemption on petroleum products introduced in the Finance Act 2024.

According to industry figures, refineries are looking at Rs 18 billion in losses, while oil marketing companies (OMCs) might take a Rs 17 billion hit.

The exemption covers petrol, high-speed diesel, kerosene, and light diesel oil, blocking companies from claiming input tax credits and driving up their operating costs. This uncertainty has also delayed refinery upgrade deals with the Oil & Gas Regulatory Authority (Ogra), as the new petroleum minister has not yet met with industry leaders.

Sources within the sector caution that keeping the tax exemption in place will hurt profits and put heavy financial pressure on the industry, threatening projects vital for a steady fuel supply. Refinery upgrades, needing over $6 billion in investment, are stuck due to the unresolved tax problem.

These upgrades, once finished, would allow local refineries to make Euro V-standard fuels and boost diesel output, cutting reliance on imported fuel and saving foreign currency.

A senior oil official told The News that the government might scrap the exemption in the next budget if they heed the industry’s pleas. The sector has reached out to the Special Investment Facilitation Council (SIFC) and the prime minister for a fix, but no progress has been made yet.