Govt increases GST on petroleum products to 22%

[Kabira]

Govt increases GST on petroleum products to 22%

The rise in GST will effectively deprive consumers of an estimated Rs 5bn worth of relief after oil prices fell in the international market.—File photo

ISLAMABAD: The federal government on Tuesday increased sales tax on petroleum products by five per cent, effectively depriving consumers of an estimated Rs5 billion worth of relief following the fall of crude oil prices in the international market.

The increase in GST on some petroleum products was announced through a notification issued today by the Federal Board of Revenue (FBR) on the advice of the Finance Ministry.

According to the notification, a copy of which is available with DawnNews, sales tax will be charged at the rate of 22 instead of 17pc on High-speed Diesel oil, Light Diesel Oil, Kerosene, and Motor spirit including HOBC.

The notification shall take effect from Jan 1, 2015.

Crude oil prices have fallen sharply in the international market since late June, losing around 30pc as supplies increase and global demand for oil grows more slowly.

The measure to increase GST on the petroleum products was taken by the government to partially offset a shortfall in revenue of the FBR after the decline of oil prices in the global market.

Sources said the decision was taken after Finance Minister Ishaq Dar held a series of meetings with the ministries of finance and petroleum, Oil and Gas Regulatory Authority (Ogra) and FBR to find ways of retaining some of the reduction in oil prices instead of passing on full benefit to consumers.

Sources say the monthly impact of reduction in oil prices was Rs1-3bn, but the real cause of concern was the government’s loss on account of windfall revenue loss on crude, which normally yielded Rs30-35bn every year as a result of higher international price.

Govt increases GST on petroleum products to 22% - Pakistan - DAWN.COM

 

[farhan_9909]

For the time being,it may be good but if the oil prices rise again,than they better withdraw it

 

[asquare]

Somewhat off topic: When did Pakistan implement it's GST? How were the provincial governments compensated for the loss of revenue? Was it politically contentious?

I'm asking because, as you might know, India has struggled to push through it's GST. At the absolute earliest, we are looking at implementation by FY 17.

 

[Hyde]

It is a good idea, since the prices of oil are coming down, the government must take it as an opportunity and try to make up for the losses they incurred since past many years due to high oil prices. Raising GST is fine as the public wouldn't know since they are getting 20-40% cheap oil as compared to couple of months ago.

When I was in Pakistan, the price of petrol was hovering around 111-113 rupees per litre and now it has come down to 78 rupee per litre. If the government can raise GST and even if the price goes as high as 85... The common man will still be happy for seeing the price that was many years ago.

Just 1 rupee per litre of extra income could generate billions of extra income for the government I guess which can be used for the welfare of the people (barring corruption)

 

[BetterPakistan]

Govt increases GST on petroleum products to 22%

The rise in GST will effectively deprive consumers of an estimated Rs 5bn worth of relief after oil prices fell in the international market.—File photo

ISLAMABAD: The federal government on Tuesday increased sales tax on petroleum products by five per cent, effectively depriving consumers of an estimated Rs5 billion worth of relief following the fall of crude oil prices in the international market.

The increase in GST on some petroleum products was announced through a notification issued today by the Federal Board of Revenue (FBR) on the advice of the Finance Ministry.

According to the notification, a copy of which is available with DawnNews, sales tax will be charged at the rate of 22 instead of 17pc on High-speed Diesel oil, Light Diesel Oil, Kerosene, and Motor spirit including HOBC.

The notification shall take effect from Jan 1, 2015.

Crude oil prices have fallen sharply in the international market since late June, losing around 30pc as supplies increase and global demand for oil grows more slowly.

The measure to increase GST on the petroleum products was taken by the government to partially offset a shortfall in revenue of the FBR after the decline of oil prices in the global market.

Sources said the decision was taken after Finance Minister Ishaq Dar held a series of meetings with the ministries of finance and petroleum, Oil and Gas Regulatory Authority (Ogra) and FBR to find ways of retaining some of the reduction in oil prices instead of passing on full benefit to consumers.

Sources say the monthly impact of reduction in oil prices was Rs1-3bn, but the real cause of concern was the government’s loss on account of windfall revenue loss on crude, which normally yielded Rs30-35bn every year as a result of higher international price.

Govt increases GST on petroleum products to 22% - Pakistan - DAWN.COM

Government and FBR is doing it to increase GST a bit. Why don't the government tax the companies whom are not properly paying their GST to increase tax? Why don't government collect income taxes from rich people? Why didn't the government increased tax on cigrattes which is very bad for health and our government just has a tax of 70% on it why didn't the government increased it to 100% to reduce its sales and to increase the GST? Why it happened on petrol which is the main used thing today in Pakistan? Petrol prices reduced to half internationally, do our government reduced the prices of petrol to half? They didn't and after that government collected more profits from petrol sale than why government is increasing the GST on petrol?

 

[Hyde]

Government and FBR is doing it to increase GST a bit. Why don't the government tax the companies whom are not properly paying their GST to increase tax? Why don't government collect income taxes from rich people? Why didn't the government increased tax on cigrattes which is very bad for health and our government just has a tax of 70% on it why didn't the government increased it to 100% to reduce its sales and to increase the GST? Why it happened on petrol which is the main used thing today in Pakistan? Petrol prices reduced to half internationally, do our government reduced the prices of petrol to half? They didn't and after that government collected more profits from petrol sale than why government is increasing the GST on petrol?

Sir I don't know any country in the world besides Pakistan who reduced the prices of Petrol as much as we did. It could be due to fear factor of anarchy march or the government not having proper mechanism to control prices.

In UK, when the price of oil was around 110 dollars per barrel we used to get petrol for about £1.35 per litre
Now the price is 55 dollars per barrel and we are getting petrol for £1.15 per litre

so only 20p discount and that too after reducing 1p after few days and so on so forth. At similar price many years ago, we used to get petrol for £75p a litre.

The UK government can still do it but they are not doing it... Check out the regional prices of Petrol around Pakistan and you learn the bitter fact that we are selling petrol for the cheapest price in the whole region.

and I do agree that the government must tax everybody and not put burden on single sector

 

[xyxmt]

Sir I don't know any country in the world besides Pakistan who reduced the prices of Petrol as much as we did. It could be due to fear factor of anarchy march or the government not having proper mechanism to control prices.

In UK, when the price of oil was around 110 dollars per barrel we used to get petrol for about £1.35 per litre
Now the price is 55 dollars per barrel and we are getting petrol for £1.15 per litre

so only 20p discount and that too after reducing 1p after few days and so on so forth. At similar price many years ago, we used to get petrol for £75p a litre.

The UK government can still do it but they are not doing it... Check out the regional prices of Petrol around Pakistan and you learn the bitter fact that we are selling petrol for the cheapest price in the whole region.

and I do agree that the government must tax everybody and not put burden on single sector

In Canada it has come down from 1.34 /liter to 0.97/liter, thats about 40% reduction and prices include 43% sales tax...your UK oil marketing companies are ripping you off...I know in US prices have come down almost 50%

 

[Hyde]

In Canada it has come down from 1.34 /liter to 0.97/liter, thats about 40% reduction and prices include 43% sales tax...your UK oil marketing companies are ripping you off...I know in US prices have come down almost 50%

It is like this all over Europe.

Even Pakistan wouldn't have reduced so much if the pressure of anarchy march wasn't there. They just defused the dharnay issue by making everything super cheap. The prices are not true and if the oil prices did not fall further, I wouldn't be surprised if in coming weeks you will see oil back around 90... still cheaper than 115

 

[Donatello]

Somewhat off topic: When did Pakistan implement it's GST? How were the provincial governments compensated for the loss of revenue? Was it politically contentious?

I'm asking because, as you might know, India has struggled to push through it's GST. At the absolute earliest, we are looking at implementation by FY 17.

GST was always there, sometimes known as the Sales tax.....it was a federal subject after partition and remained so until the year 2000s. In 2011 Provinces were given the right to collect their own GST. Before that, the FBR (Federal Board of Revenue) would collect the tax and then reimburse the respective provinces. So now the provinces collect their own GST........but it is not fully independent.....Sindh has its own revenue department up and running, but other provinces don't. So it will take time. As more and more finance powers are transferred to respective provinces, revenue will also be handed over to them.........i can only imagine how complicated it would be in India with such a large population and jurisdictions.

 

[xyxmt]

It is like this all over Europe.

Even Pakistan wouldn't have reduced so much if the pressure of anarchy march wasn't there. They just defused the dharnay issue by making everything super cheap. The prices are not true and if the oil prices did not fall further, I wouldn't be surprised if in coming weeks you will see oil back around 90... still cheaper than 115

they have reduced it in the past also in PPP govt

 

[AZADPAKISTAN2009]

Pakistani Oil main Ghee Shakar ziyada hota hai , that is why its more expensive

 

[asquare]

GST was always there, sometimes known as the Sales tax.....it was a federal subject after partition and remained so until the year 2000s. In 2011 Provinces were given the right to collect their own GST. Before that, the FBR (Federal Board of Revenue) would collect the tax and then reimburse the respective provinces. So now the provinces collect their own GST........but it is not fully independent.....Sindh has its own revenue department up and running, but other provinces don't. So it will take time. As more and more finance powers are transferred to respective provinces, revenue will also be handed over to them.........i can only imagine how complicated it would be in India with such a large population and jurisdictions.

Thanks! You guys have a somewhat different concept of GST. What India has been try to do is to have a unified GST where individual states don't collect excise, octroi etc. The attempt is to facilitate the movement and sale of goods across states, without tax distortions. For this constitutional amendment to pass, the states have to be on board. So far they've been trying to come to an agreement about how the central government will compensate the states for the loss of revenue. They appear to have reached an agreement this month. However, the bill couldn't be introduced in parliament because, as is the norm now, parliament didn't function. Once the bill is introduced and passes, it'll take a year for it to be implemented. If it goes through (a big if, given how we function), it'll be the biggest tax reform since independence.

 

[Hyde]

they have reduced it in the past also in PPP govt

Reducing prices is one thing but reducing so much is another.

During PPP tenure the prices of oil were always sky-rocked a part from 1 blips when the oil prices were down to $40 dollars per barrel but soon only to rise once again and keep the government under pressure. It is for the first time the prices of oil has been reduced and likely to remain low

 

[Donatello]

Thanks! You guys have a somewhat different concept of GST. What India has been try to do is to have a unified GST where individual states don't collect excise, octroi etc. The attempt is to facilitate the movement and sale of goods across states, without tax distortions. For this constitutional amendment to pass, the states have to be on board. So far they've been trying to come to an agreement about how the central government will compensate the states for the loss of revenue. They appear to have reached an agreement this month. However, the bill couldn't be introduced in parliament because, as is the norm now, parliament didn't function. Once the bill is introduced and passes, it'll take a year for it to be implemented. If it goes through (a big if, given how we function), it'll be the biggest tax reform since independence.

The concept of State/Provinces collecting the sales tax is that they only get what they should and makes the job of federal government easy.....the revenue collected by states/provinces should then be used to balance their budgets. Why should, for example Punjab not get the tax for goods consumed in Punjab rather than Sindh? If Sindh is the one producing or importing the goods, but the final destination for consumption/retail is Punjab, then they should be taxed in Punjab.
So states will lose money because they didn't deserve it in the first place.

 

[asquare]

The concept of State/Provinces collecting the sales tax is that they only get what they should and makes the job of federal government easy.....the revenue collected by states/provinces should then be used to balance their budgets. Why should, for example Punjab not get the tax for goods consumed in Punjab rather than Sindh? If Sindh is the one producing or importing the goods, but the final destination for consumption/retail is Punjab, then they should be taxed in Punjab.
So states will lose money because they didn't deserve it in the first place.

Agreed. The situation in India is that, apart from sales tax, state governments levy octroi (a tax that states charge for entry of goods into the state), excise duty (like customs duty but at the state level), stamp duty etc for the movement of goods across states. So a guy producing steel in the south of India, for the Delhi market will pay a number of these state taxes (depending on which states his goods pass through), before he can sell his steel in Delhi. The idea is to unify everything into a GST and pay compensation to the states if they face a loss of revenue due to the withdrawal of these state taxes. The aim is to create a unified market and to reduce the logistics costs for companies. There will still be a 'state component' to the GST which the states will collect as a VAT based on input tax credits.