ISLAMABAD: The Petroleum Division has decided to raise the issue of general sales tax (GST) exemption on petroleum products with the International Monetary Fund (IMF) in an effort to pave the way for $6 billion worth of investments in oil refinery upgrades. An IMF mission is currently in Pakistan for programme review under its $7 billion Extended Fund Facility.
According to sources, Petroleum Minister Ali Pervaiz Malik will hold discussions with the Fund to address concerns raised by local refineries, which claim that the GST waiver caused losses of around Rs40 billion in the last fiscal year. Although the government allowed the industry to collect Rs1.87 per litre as temporary relief, the measure fell short of restoring investor confidence.
The minister aims to finalise a comprehensive package to encourage refineries to commence plant upgrade projects. However, the GST exemption has deterred both local and foreign investors, including Chinese firms, from injecting fresh capital due to inconsistent government policies.
The government had earlier pledged to impose up to 5% GST in the 2025-26 federal budget but failed to follow through. The Special Investment Facilitation Council (SIFC) has already directed the finance and petroleum ministries to resolve the matter, yet no breakthrough has been achieved.
Industry stakeholders, represented by the Oil Companies Advisory Council (OCAC), have voiced strong dissatisfaction, warning that the continuation of the GST holiday undermines the Pakistan Brownfield Oil Refining Policy 2023 and threatens the viability of refinery operations. The policy, they argue, is being implemented only partially, discouraging investors from committing funds to upgrade projects aimed at producing environment-friendly fuels.
“Foreign investors are not ready to pump money into refinery modernisation under the current tax regime,” the OCAC cautioned, underscoring the urgency for a policy resolution.
Story by Zafar Bhutta
