Monitoring Desk
ISLAMABAD: The Federal Board of Revenue (FBR) has reportedly imposed Federal Excise Duty (FED) of Rs80 per litre on petroleum top naphtha, white spirit/mineral turpentine oil (MTT) and solvent oil from July 1, 2026, to curb adulteration of petroleum products.
The FBR issued sales tax budget instructions for 2026-27 to its field formations under the heading “Curbing adulteration in petroleum products through FED intervention”, outlining the new duty mechanism introduced through the Finance Act 2026.
According to the FBR, petroleum products are subject to petroleum development levy (PDL), whereas petroleum top naphtha, white spirit/mineral turpentine oil and solvent oil were not chargeable to PDL.
The difference in levy treatment, the FBR said, was being exploited by certain unscrupulous elements, who mixed these products with PDL-chargeable petroleum products and sold the adulterated products at higher prices.
To discourage the practice, FED has now been imposed at Rs80 per litre on the three products through the sales tax mode.
The FBR said a contingent mechanism had also been introduced for industries using these products as industrial input materials. Under the mechanism, specified persons or classes of persons may be excluded or exempted from the duty where the final product is either exempt from sales tax or both the supplier and manufacturer are integrated with the Board’s computerized system for issuance of digital invoices.
Such exclusion or exemption will remain subject to the conditions prescribed by the FBR.
The revenue authority said the FED on the specified petroleum products had been imposed through insertion of Serial No. 65 in Table-I of the First Schedule to the Federal Excise Act, 2005.
The same products have also been included in the Second Schedule to enable collection of FED through the sales tax mode, allowing registered persons to adjust the duty against their output sales tax liability.
The FBR said the measure was aimed specifically at addressing the misuse of the different tax treatment of petroleum products and preventing their use in adulteration.
Separately, the FBR highlighted the importance of refinery upgradation for aligning Pakistan’s domestic refining capacity with modern environmental standards, including cleaner fuel specifications, improved emission controls and lower carbon and sulphur intensity.
It said major petroleum products produced by refineries were not chargeable to sales tax, while refinery upgradation, scheduled turnarounds, maintenance and overhauls require the import of high-value machinery, equipment and other parts that are subject to sales tax.
The FBR added that sales tax exemptions had therefore been granted on specified items used for such purposes, subject to prior approval of the relevant division and the prescribed conditions.