The Federal Board of Revenue (FBR) has recorded a decline of Rs45.6 billion (-39.8 percent) in sales tax collection on petroleum (POL) products during the first half of the current fiscal year.
According to the official statistics, the collection of sales tax fell to Rs69 billion during July–December of the current fiscal year 2021-22 as compared to Rs114.60 billion collected in the same period of the last fiscal year 2020-21.
The decline in revenue collection from petroleum products mainly came due to lower rates of sales tax kept by the government in order to provide relief to the masses by not passing on the actual increase in petroleum prices as surge in international markets.
The flat rate of sales tax is 17 percent. However, the government decided to keep the rate of sales tax on petroleum products to the minimum level.
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FBR massively cuts sales tax on petroleum products
According to an SRO issued on February 10, 2022, the sales tax rates have been reduced as: petrol 0.79 percent; high speed diesel 3.17 percent, kerosene oil 5.30 percent and light diesel oil at zero percent.
The fall in sales tax collection from supply of petroleum products resulted in a decline in collection of sales tax on domestic supply. The overall sales tax collection on domestic supplies fell by 6.2 percent to Rs382.68 billion during the first half of the current fiscal year as compared with Rs408.13 billion in the corresponding period of the last fiscal year.
However, the fall in sales tax collection domestically was offset by the massive growth in collection of sales tax on imports. The sales tax collection on imports surged by 75.4 per cent to Rs892.30 billion during the first half of the current fiscal year as compared with Rs508.61 billion in the corresponding half of the last fiscal year.
The growth in sales tax collection on imports can be attributed to sharp jump in imports and massive decline in rupee value.
The import bill of the country registered a growth of 66.23 per cent to $40.65 billion during the first half of the current fiscal year as compared with $24.45 billion in the corresponding half of the last fiscal year.
Similarly, the Pak Rupee (PKR) fell sharply by Rs18.97 to the dollar during the first half of the current fiscal year. The rupee ended down by 12.04 percent from Rs157.54 to the dollar on June 30, 2021 to Rs176.51 on December 31, 2021.
The overall sales tax collection however, recorded 39.1 per cent to Rs1.27 trillion during the first half of the current fiscal year as compared with Rs916 billion in the corresponding half of the last fiscal year.
