The government has decided to increase the general sales tax (GST) rate on all petroleum products from 17 per cent to 22 per cent, hoping to increase tax collection by an estimated Rs48 billion on an annual basis.
Business community has opposed the imposition of 5 percent additional GST on petroleum products and called for urgent withdrawal of this anti-business and anti-people decision. In the wake of more than 48 percent decline in oil prices in the international market, people were expecting from the government to pass on its full benefit to them, but the further hike in GST on POL products would deprive them of any such relief.
The government was collecting more than Rs.8-billion per month from petroleum levy which ranged from Rs.6/per liter to Rs.14/per liter while the imposition of 5 percent more tax in addition to 17 percent GST would significantly dilute the beneficial impact of reduced POL prices. In comparison with other countries, 17 percent GST in Pakistan was amongst the highest in the world as compared to the average around 12 percent GST in Asia. However, the government has further increased this tax on POL products taking it to 22 percent which has no precedent in the world.
We can argue that government has decided to take this step after the sit-ins across the country had ended. Some were arguing that sit-ins had negative impact on economy but the pressure kept the government at bay to increase the GST. Would government provide relief to the general public only after the pressure of protests? FBR’s inefficiency and incapability to meet its tax collection target resulting to increase the GST that is also a violation to the promise made to the IMF. Instead of increasing taxes on POL products, government has many other better options to improve its revenue collection.