Petroleum Division Targets GST Fix for $6B Refinery Upgrades

The Petroleum Division is set to engage the International Monetary Fund (IMF) to address the general sales tax (GST) exemption on petroleum products, aiming to unlock $6 billion in refinery upgrade investments, according to sources cited by The Express Tribune.

This initiative coincides with an IMF mission in Pakistan for programme review talks under the $7 billion Extended Fund Facility. Petroleum Minister Ali Pervaiz Malik plans to tackle refinery complaints over a Rs40 billion loss in the last fiscal year due to the GST exemption. While a temporary measure permits the industry to collect Rs1.87 per litre to mitigate losses, the minister seeks a comprehensive package to spur plant modernization.

Sources revealed that inconsistent government policies have discouraged Chinese investors from funding refinery projects. The government had previously pledged to cap GST at 5% in the FY26 budget, a commitment it failed to honor.

The Special Investment Facilitation Council (SIFC) has instructed the Finance and Petroleum Ministries to resolve the GST exemption issue, yet no solution has been implemented. Industry representatives, including the Oil Companies Advisory Council (OCAC), warned that prolonged uncertainty jeopardizes $6 billion in investments aimed at producing environmentally friendly fuels.

The OCAC emphasized that the continued sales tax break undermines the Pakistan Brownfield Oil Refining Policy 2023, which suffers from inconsistent implementation, eroding stakeholder confidence. The council noted that foreign investors are reluctant to commit funds to refinery upgrade projects due to these challenges.