Rising Taxation
ISLAMABAD: Consumers in Pakistan are bearing a substantial tax burden on petroleum products, as revealed by official documents. The breakdown of the pricing structure highlights the significant impact of taxes, duties, and various margins on the final retail price of fuel.
According to the documents, a total of Rs107.12 per litre is collected in the form of taxes, duties, and margins on petrol, while high-speed diesel (HSD) carries a tax burden of Rs104.59 per litre. This heavy taxation significantly contributes to the high fuel prices in the country.
The ex-refinery price of petrol, before the imposition of any taxes or duties, is recorded at Rs148.51 per litre. Similarly, the base price of HSD stands at Rs154.06 per litre. However, after adding various levies and commissions, the retail price for petrol has been set at Rs255.63 per litre, while HSD is priced at Rs258.64 per litre.
A significant portion of this cost comes from the petroleum levy, which currently stands at Rs70 per litre for both petrol and HSD. Additionally, customs duty is another major component of the price structure, with petrol being subjected to Rs15.28 per litre and HSD carrying Rs15.78 per litre in customs duties.
Apart from government-imposed taxes, other stakeholders in the petroleum supply chain also receive their share from the final fuel price. Petrol station dealers earn Rs8.64 per litre as commission on both petrol and HSD. Meanwhile, oil marketing companies (OMCs) take Rs7.87 per litre as their margin.
Another component of the pricing structure is the Inland Freight Equalisation Margin (IFEM), which helps standardize fuel prices across different regions. The IFEM for petrol is Rs5.33 per litre, while for HSD, it is Rs2.30 per litre.
Despite the high overall taxation on fuel, the documents reveal that no sales tax is currently being imposed on petrol or diesel. This suggests that the government has chosen to rely more heavily on petroleum levies and customs duties rather than general sales tax (GST) to generate revenue from the fuel sector.
In an effort to provide some relief to the public, Prime Minister Shehbaz Sharif announced on March 15 that the prices of petroleum products would remain unchanged for the next fortnight.
While global crude oil prices saw a decline, instead of passing this benefit directly to consumers through reduced fuel prices, the government decided to redirect the financial relief toward lowering electricity tariffs for the masses.
The Finance Division also issued an official notification confirming that the government had opted to maintain the current prices of all petroleum products. This decision comes as part of broader economic measures aimed at balancing inflationary pressures and ensuring fiscal stability while also addressing concerns over rising energy costs.
With fuel prices remaining high, the impact of petroleum taxation continues to be a matter of concern for consumers, businesses, and industries alike. Given the vital role of fuel in transportation and economic activity, the burden of high fuel prices often leads to inflationary effects across multiple sectors, affecting the cost of goods, services, and overall economic growth.
