Govt decides to keep GST on HSD unchanged

ISLAMABAD: The government has decided to keep the general sales tax (GST) unchanged at the standard rate of 17 percent on the high-speed diesel (HSD), causing the price of HSD to go up by Rs2.54 per litre for a period of 15 days with effect from July 16, 2021.

According to a notification issued by the Federal Board of Revenue (FBR) on Monday, the GST rate on HSD was kept unchanged at 17 percent ad valorem and it was the only HSD where the petroleum levy was kept at Rs1.90 per litre in a bid to avoid facing maximum shortfall on account of collection of GST on largely-consumed POL products in the form of high-speed diesel (HSD).

The Brent crude oil prices in the international market stood at $73 per barrel and the Pakistani authorities finalised deals of the POL products on the basis of two to three months. While the POL prices stood at over $60 per barrel, it will be difficult for the government to decrease the prices in the domestic market in the coming weeks and months in view of the prevailing rising trends of prices in the international market.

The government was eyeing to pocket Rs610 billion through the petroleum levy and currently, it was being charged at the minimal level of Rs1.90 per liter on the HSD, while on other POL products, the levy stood at zero.

However, in the coming weeks, the government would have a chance to bring down the GST at a reduced rate on the HSD, otherwise it had a minimum space of GST to reduce the rate on other products.

The HSD was being used largely in public transport, so the government kept the GST rate at the standard rate of 17 percent and the petroleum levy was brought at the minimal level at Rs1.90 per litre. The petroleum levy on all other POL products was brought down to zero including MS Petrol, Kerosene and Light Diesel Oil (LDO).

On MS Petrol, the GST rate was brought down from 16.40 percent to 10.77 percent with effect from July 16, 2021. The Ministry of Finance stated that the Oil and Gas Regulatory Authority (OGRA) had recommended Rs11.50 per litre increase in the price of MS Petrol; the prime minister, however, considering to provide maximum relief to the public had allowed increase of only Rs5.40 per litre (absorbing Rs6.10 per litre).

Moreover, the GST rate on Kerosene Oil was kept unchanged at 6.70 percent on a fortnightly basis with effect from July 16, 2021, causing the price of Kerosene to go up by Rs1.39 per litre. It increased from Rs85.75 per litre to Rs87.14 per litre with effect from July 16, 2021.

The GST on light diesel oil (LDO) was kept unchanged at 0.20 percent ad valorem and the price went up by Rs1.27 per litre, so it had increased from Rs83.40 to Rs84.67 per litre with effect from July 16, 2021.

The Ministry of Finance had claimed that the government was providing maximum relief to consumers by reducing the prices of petroleum products since April, 2021. However, the oil prices in the international market were on the rise, the government took the decision not to pass on the entire burden of increase to consumers. The rates of the sales tax and petroleum levy have been adjusted in a manner that maximum relief is provided to consumers.