FBR imposes Rs80/litre FED on three petroleum products
✧ GENERATE BRIEFING +
The Federal Board of Revenue has imposed a Federal Excise Duty of Rs80 per litre on petroleum top naphtha, white spirit or mineral turpentine oil, and solvent oil effective July 1, 2026, to curb fuel adulteration across Pakistan. Previously excluded from the petroleum development levy regime applicable to conventional fuels, these three products created opportunities for operators to mix them with regulated fuels and sell adulterated products at inflated prices. Enacted under the Finance Act 2026 and integrated into the First and Second Schedules of the Federal Excise Act 2005, the duty is collected through the sales tax mechanism, allowing registered businesses to claim adjustments. The FBR has established industrial exclusions for qualifying manufacturers integrated with its computerized digital invoicing system. This tax intervention addresses market management pressures amid heightened international crude prices and global oil supply disruptions.
ISLAMABAD: The Federal Board of Revenue (FBR) has imposed Federal Excise Duty (FED) of Rs80 per litre on three petroleum-related products from July 1, 2026, as part of measures to curb the adulteration of petroleum products.
The products covered by the new levy are petroleum top naphtha, white spirit/mineral turpentine oil and solvent oil. The FBR issued sales tax budget instructions to its field formations under the policy titled “Curbing adulteration in petroleum products through FED intervention.”
Under the Finance Act 2026, conventional petroleum products are subject to petroleum development levy (PDL), while the three products covered by the new FED were previously outside the PDL regime. According to the FBR, this difference created an opportunity for some operators to mix the products with PDL-liable fuels and sell the adulterated product at higher prices.
The Rs80-per-litre FED has therefore been introduced to discourage such practices. The duty is being collected through the sales tax mechanism, allowing registered businesses to adjust the FED paid against their output sales tax liability.
The FBR has also provided a mechanism for industries that use these products as inputs. Certain persons or classes of persons may be excluded from the duty where their final products are exempt from sales tax or where both suppliers and manufacturers are integrated with the FBR’s computerised system for digital invoicing, subject to prescribed conditions.
The new measure follows the addition of the relevant products to the First Schedule of the Federal Excise Act, 2005, while the same goods have also been included in the Second Schedule to facilitate collection through the sales tax system.
The FBR said the broader tax framework also takes into account the requirements of Pakistan’s refining industry. Refinery modernisation requires significant imports of machinery, equipment and other components, while the government has provided sales-tax exemptions on specified items subject to prior approval.
The new levy comes as Pakistan faces heightened pressure over petroleum prices and fuel-market management, with domestic petrol and diesel prices already affected by elevated international crude prices and disruptions in global oil supplies.
