Pakistan’s local refineries have formally requested the National Assembly’s Standing Committee on Finance & Revenue to intervene in addressing the issue of sales tax exemption on petroleum products under the Finance Act 2024, The News reported.
A joint letter from five key refineries — Pakistan Refinery Limited, National Refinery Limited, Pak-Arab Refinery Limited, Attock Refinery Limited, and Cnergyico Pakistan Limited — was sent to the committee’s chairman, highlighting the challenges faced by the refining sector due to recent changes in tax policy.
The Finance Act 2024 reclassified key petroleum products, including petrol, high-speed diesel, kerosene oil, and light diesel oil, from ‘zero-rated’ to ‘exempt supplies’. As a result, refineries are now disallowed from claiming input sales tax, increasing both operational and capital costs.
Previously, these products were categorized as ‘taxable supplies’ with zero-rated sales tax, ensuring no additional impact on consumer prices.
The refineries expressed concern that this shift in tax status is severely disrupting daily operations and threatening the financial viability of important upgrade projects.
They warned that if the sales tax exemption remains in place, it would impose a financial strain of Rs18 billion on the oil refining sector. This could jeopardise capital-intensive upgrading projects valued at $5.5 billion, which were planned under the Brownfield Refining Upgradation Policy, approved by the government in August 2023.
The refineries have emphasised that a swift resolution is critical for the survival of Pakistan’s oil refining industry. They cautioned that further delays would exacerbate operational and financial difficulties, putting the sector’s future at risk.