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Govt mulls increase in petroleum levy to Rs.100 per liter

Govt mulls increase in petroleum levy to Rs.100 per liter

Govt mulls increase in petroleum levy to Rs.100 per liter

Expected petrol prices in Pakistan from June 16 after Budget 2024-25

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The federal government is contemplating imposing a carbon tax on petroleum and similar products or raising the petroleum levy threshold up to Rs. 100 per liter in the upcoming budget.

This move comes in response to pressure from the International Monetary Fund (IMF), as reported by Dawn.

The IMF is advocating for an integrated general sales tax (GST) to achieve the benefits of a value-added tax (VAT) for documentation and digitization.

Alongside this, the carbon tax is seen as a measure to secure cheaper loans and grants from multilateral institutions and to enhance access to green and e-bonds.

While the IMF has demanded the reintroduction of GST on petroleum products and a petroleum levy of up to Rs. 60 per liter, Pakistan has proposed reinstating the carbon tax or increasing the petroleum levy to Rs. 100 per liter for the next fiscal year.

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The government views the carbon tax and an increase in the levy as alternatives to GST, as revenue generated from petroleum products remains entirely in the federal kitty, unlike GST, where provinces receive a share.

Currently, the government collects a petroleum levy of Rs. 60 per liter on both petrol and high-speed diesel, totaling Rs. 720 billion in the first nine months of the current fiscal year.

Under IMF commitments, the government aims to collect Rs. 869 billion as a petroleum levy during the ongoing fiscal year (FY24).

Other revenue-enhancing proposals include implementing a 1 percent withholding tax on non-filer bank transactions of Rs. 50,000 or more and increasing the tax-to-GDP ratio by 3 percent.

The government’s broader tax agenda includes expanding the tax base by converting GST into a true VAT system, extending the tax base to retail and wholesale sectors, agriculture, and implementing uniform income tax rates across all income sources.

Authorities are committed to ongoing adjustments in gas and electricity tariffs, alongside efforts to reduce energy costs and circular debt.

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The upcoming fiscal year is expected to maintain a tight monetary policy stance, with increased efforts toward adopting a market-based exchange rate.

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