FBR faces Rs35bln in revenue shortfall from diesel, petrol in July-Dec

ISLAMABAD: The Federal Board of Revenue (FBR) has estimated a revenue shortfall of Rs35 billion in the first six months of the current fiscal year of 2018/19 alone due to reduction of sales tax rates on petrol and diesel, official data showed on Monday.

The government sharply reduced sales tax on high speed diesel (HSD) and motor spirit to 12 percent and 4.5 percent from 37 percent and 22 percent, respectively, in the July-December period of FY2019.

General sales tax on HSD was cut to 27.5 percent in July 2018 from 33.5 percent in July 2017. It was 22 percent in August 2018 as against 37.8 percent in the corresponding month a year earlier. In September 2018, sales tax on HSD was 22 percent compared with 30 percent in the same month a year ago.

In October, the sales tax was 17.5 percent as against 31 percent a year earlier. The rate was brought down to 12 percent in November from 31 percent, while sales tax on HSD was 13 percent in December 2018 as against 31 percent in the corresponding month a year earlier, the official data showed.

The government, however, kept the general sales tax rate unchanged at 17 percent from January onwards and it is expected to remain the same till June-end. Sales tax on HSD, in the second half of the last fiscal year, rose to 27.5 percent.

Sales tax on petrol was cut to 14.5 percent in July 2018 from 20.5 percent in July 2017. It was 9.5 percent in August 2018 compared with 22 percent in August 2017.

In September, the rate was 9.5 percent as against 17 percent a year earlier.

It was 4.5 percent in October and November 2018 compared with 17 percent in the corresponding months a year ago, while sales tax on petrol was reduced to eight percent in December last year from 17 percent in the same month a year ago.

The official data showed that average sales tax rates, in March to June 2018, were around 16 percent and 25.2 percent on motor spirit and HSD, respectively, which currently are 17 percent.

The collection on petroleum products declined 21 percent to Rs131.4 billion in the first eight months of the current fiscal year.

FBR is expected to face at least Rs17 billion reduction in revenue collection from petroleum products in the remaining four months due to stagnant growth in petrol demand, decline in consumption of HSD and average cut in tax to 17 percent from 25.2 percent.

The data further showed that FBR faced Rs29 billion in revenue shortfall on account of sales tax on imports up to February and it is expected to reach Rs44 billion till June-end.