POL consumers paying levy in lieu of sales tax

The Federal Board of Revenue (FBR) has confirmed that consumers of petroleum products (POL) effectively pay the Petroleum Development Levy (PDL) instead of sales tax, as petroleum products are exempt from sales tax under the current tax regime.

 

According to the FBR Tax Expenditure Report 2026, sales tax exemptions on petroleum products are included in the country's overall sales tax expenditure. However, since the government collects the Petroleum Development Levy on these products, sales tax is not imposed. The FBR noted that consumers are already contributing through the PDL, making the levy a substitute for sales tax on petroleum products.

 

After excluding the PDL-related component from total sales tax expenditures, the FBR estimated the cost of other sales tax exemptions at PKR 1.274 trillion during the 2024–25 fiscal year.

 

The report identified the major beneficiaries of sales tax exemptions as the health and medical sector, fertilizer and agriculture, food, manufacturing, energy, stationery, and businesses operating in Gwadar and Export Processing Zones (EPZs).

 

The report also highlighted the impact of income tax exemptions, stating that 11 major sectors resulted in an estimated PKR 580 billion annual revenue loss.

 

Key beneficiaries of income tax exemptions include the social security sector, pension recipients, energy and mining, financial services, healthcare and pharmaceuticals, education, tribal areas, and charitable organizations and donations.