No petrol relief: Budget eyes 5% sales tax, Rs100 levy

According to sources, a proposal is under review to impose a sales tax ranging from 3% to 5% on petroleum products, which are currently exempt from any sales tax.

At present, the sales tax rate on these products stands at zero.

The proposed plan also includes increasing the petroleum levy to a ceiling of Rs 90 to Rs 100 per litre.

Currently, the petroleum levy is Rs 78.02 per litre on petrol and Rs 77.01 per litre on high-speed diesel.

Insiders revealed that these tax proposals will be finalised only after receiving formal approval through the Finance Bill by the federal cabinet.

Under the conditions set by the International Monetary Fund (IMF), the estimated target for petroleum levy collection in the next fiscal year has been set at Rs1,311 billion.

This represents an increase of Rs194 billion compared to the current fiscal year.

From July 2024 to March 2025, petroleum levy collections totalled Rs 833.84 billion.

Officials warn that the anticipated tax measures will likely prevent any decline in international fuel prices from being passed on to the public in the coming year.

It is pertinent to mention here that on April 16, 2025, the federal government issued a presidential ordinance abolishing the Fifth Schedule, effectively removing the cap on petroleum levy (PL) rates and granting the government unrestricted authority to set levy amounts at its discretion.

Previously, under the Fifth Schedule, the government was bound to a maximum limit of Rs 70 per litre for the petroleum levy.

With the schedule now abolished, there is no legal ceiling, allowing the government to impose any rate of levy it deems appropriate.

The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has expressed serious concern over the possible imposition of additional levies, including a sharp hike in the petroleum levy.

The BMP Chairman and FPCCI former president Mian Anjum Nisar termed these developments deeply troubling for the already struggling business community and warned that such decisions would further strain the economy and damage investor confidence.