Key Takeaways
- The Federal Board of Revenue (FBR) has imposed a Federal Excise Duty of Rs80 per litre on petroleum top naphtha, white spirit, and mineral turpentine oil.
- This move aims to curb the practice of adulteration in petroleum products by unscrupulous elements.
- Exemptions are provided for industries using these products as industrial inputs, subject to certain conditions.
The Federal Board of Revenue (FBR) has announced a Federal Excise Duty (FED) of Rs80 per litre on three petroleum products: petroleum top naphtha, white spirit, and mineral turpentine oil (MTT), effective from July 1, 2026. This decision is part of a broader strategy to address the issue of adulteration in these products, which has been exploited by unscrupulous elements to sell them at higher prices.
According to FBR instructions, petroleum products are chargeable to the Petroleum Development Levy (PDL), but petroleum top naphtha, white spirit, and MTT are not. This difference has been exploited by mixing these non-PDL chargeable products into PDL chargeable ones, leading to higher prices in the market.
To combat this, the FBR has introduced the FED on these three products, levied in a sales tax mode. The FBR’s move is aimed at curbing the practice of adulteration and ensuring fair pricing in the market.
However, the FBR has provided a contingent mechanism for industries that use these products as industrial inputs. Exemptions from the charge of this duty are available for industries where the final product is either exempt from sales tax or where both the supplier and the manufacturer are integrated with the Board’s computerized system for issuance of digital invoices, subject to the conditions laid down.
The FBR stated that the FED on these petroleum products has been imposed by adding S. No. 65 of Table-1 of the First Schedule to the Federal Excise Act, 2005. The same goods have also been added in the Second Schedule for imposition of FED in sales tax mode, which will enable the registered person to adjust the said duty against output sales tax.
The FBR emphasized the importance of upgradation of refineries to align domestic refining capacity with modern environmental standards, including cleaner fuel specifications, improved emission controls, and reduced carbon and Sulphur intensity. Major petroleum products of a refinery are not chargeable to sales tax, but scheduled turnaround, maintenance, and overhaul of a refinery require the import of high value machinery, equipment, other parts, etc., which are chargeable to sales tax.
Exemptions of sales tax on specified items have been granted with prior approval of the Division concerned, the FBR added. This move is expected to streamline the process and provide relief to industries that rely on these petroleum products as inputs.
