The IMF has recommended the government to levy Rs 60 on petrol, and also restore the 18% GST on petrol, which was abolished in March 2022. Federal excise duty on locally manufactured cigarettes (FED ) to be applied at the same rate, whether the project is local or non-local, and proposed to levy Petroleum Development Levy (PDL) on polluting machinery.
The IMF has also asked the FBR to step up border controls by gradually increasing excise duty on domestically produced cards and luxury goods such as yachts to prevent oil by-products from particularly sensitive areas. Illegal supply can be avoided. The IMF has also suggested that e-cigarettes be taxed at par with local cigarettes. Similarly, the IMF has called for the elimination of federal excise duties on many other items that do not have negative externalities, such as factors such as:
Great earning potential; Regarding highly inelastic demand or the luxury side, the policy recommendations provided by the IMF have been included in the technical assistance report with the Pakistani authorities. Excises are levied on a wide range of goods, including tobacco, carbonated drinks, motor cars, cement, telecommunication services, and petroleum and natural gas products, the IMF says. Regarding excise on petroleum products, the amount of federal excise duty is 0.7 percent of GDP in FY 2023.
Excise on other goods was 0.4 percent of GDP, mostly derived from the federal excise duty on cigarettes. The Petroleum Development Levy has changed several times in recent years, but was significantly increased in FY2023. In July 2022, the petroleum levy development rate on petrol was Rs 20 per litre. It has been increased to Rs 50 per liter from November 2022 and Rs 60 per liter till September 2023.
Another policy change, the IMF says, is that petroleum products should be exempted from sales tax in March 2022. It should be noted that revenue collected from sales tax under the NFC Award The petroleum development levy is shared with the provinces while the petroleum development levy remains entirely with the federal government. According to the IMF, revenue on petroleum products has decreased since 2019, despite a large increase in the Petroleum Development Levy. The overall tax rate on petrol was 29% in 2019, of which both the Petroleum Development Levy and Sales Tax used to be 14.5%. In September 2023, the total taxes on sales price were 19.6%. The relatively low tax rate on gasoline is also reflected in the sales price. The IMF also cited the example of selected neighboring countries and emerging economies. According to the IMF, the average price of gas at petrol pumps is $1.12 per liter while in Pakistan it was 0.97 dollars per liter.
In Pakistan and other contemporary countries, the price of diesel at petrol pumps in 2023 was an average of one dollar per liter. The IMF report further said that removing the exemption from sales tax on petroleum products would increase the price to 18 percent, which is the standard rate of general sales tax.
Make petrol levy Rs 60 also restore 18 Percent GST IMF
