ISLAMABAD: The Special Investment Facilitation Council (SIFC) has convened an urgent meeting on September 18 to address the mounting challenges faced by Pakistan’s oil industry, which has stalled $6 billion worth of refinery upgrade projects due to unresolved tax issues.
Refineries and oil marketing companies (OMCs) have been reeling from heavy financial losses after the government’s sales tax exemption on petroleum products caused a shortfall of Rs34 billion in FY25. Although a temporary recovery mechanism was later introduced, the core issue remains unresolved.
In the Finance Bill 2025, the government had committed to imposing a 5% general sales tax (GST) to enable progress on refinery upgrades under the Pakistan Brownfield Oil Refining Policy 2023. However, the commitment was not honored, triggering uncertainty among local refiners and foreign investors.
The Oil Companies Advisory Council (OCAC) has warned that the continuation of the tax holiday threatens business viability and undermines investor confidence. In a letter to the Petroleum Division, the OCAC chairman called for an immediate withdrawal of the GST exemption and the introduction of a mechanism that permits full input tax adjustment, stressing this as the only durable solution.
While the government has temporarily allowed the recovery of Rs1.87 per litre through the inland freight equalisation margin (IFEM) since May 16, industry leaders argue this is merely a stopgap measure with adverse implications.
Industry stakeholders caution that unless clarity is restored, investor hesitation could derail projects aimed at producing cleaner, environment-friendly fuels. “Failure to resolve this will put the $6 billion investment in Pakistan’s refining sector at serious risk,” the OCAC chairman warned.
Story by Zafar Bhutta
