To strike staff-level pact with IMF, Rs10/litre petroleum levy on the cards

In order to strike a staff-level agreement with the International Monetary Fund (IMF), the government is considering slapping Rs10 per litre petroleum levy on POL However, there is no possibility of imposition of general sales tax (GST) on POL products from July 2022, and it will be kept at zero for the time being.

In an interesting but well-thought-out strategy, devised by the economic team of the coalition government, the Ministry of Finance is going to recommend that Prime Minister Shehbaz Sharif should slap a petroleum levy of Rs10 per litre on POL products with effect from July 1, 2022. The government prefers collecting petroleum levy, instead of GST, which is nontax revenue and it does not become part of the Federal Divisible Pool (FDP) under the National Finance Commission (NFC) Award.

The Ministry of Finance proposed an increased limit of petroleum levy to the tune of Rs50 per litre, but it cannot collect the maximum limit at a time when the prices of petroleum products are witnessing an unprecedented hike in recent weeks. The POL prices had gone up by over Rs100 per litre since May 27, 2022.

The government hiked the POL prices and abolished fuel subsidies. Now the IMF is asking the government to collect taxes on POL products. Keeping in view the IMF demands, the government is exploring options to collect the petroleum levy in a phased manner in the next fiscal year, starting from July 1, 2022. If the POL prices witness a decrease in the coming weeks and months, then the government will have more space to hike the petroleum levy in coming reviews to adjust the POL prices. Currently, the government is charging zero amount through GST on POL products and it will be kept at zero for the time being until the prices in international market decrease drastically.

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