ISLAMABAD  -   The government’s decision to reduce general sales tax (GST) on petroleum products would create difficulties for the Federal Board of Revenue (FBR) to achieve its annual tax collection target.

The government had reduced the GST for the ongoing month of November to protect masses from the massive hike in on oil prices The Oil and Gas Regulatory Authority (OGRA) had worked out an increase of Rs9.02 per litre in petrol price and Rs13.22 per litre in HSD rate for November. However an increase of Rs5 has been allowed by the government, while the price of HSD was increased by Rs6.37 (5.98 percent).

The government had decided to absorb the substantial impact of increase in the prices of petroleum products and only partially pass on the increase to the consumers for the month of November. The government had reduced the GST on petrol to 4.5 percent, high speed diesel 12 percent, kerosene oil 1.5 percent and zero rated on light diesel oil as against the standard rate of 17 percent. However, sources in FBR informed that decision of reducing GST on petroleum products would negatively affect on the tax collection of the FBR.

“Definitely, the reduction in taxes on oil prices will affect the annual tax collection,” said an official of the FBR. He further said that government was compelled to reduce the GST on petroleum products otherwise prices would have massively gone up. 

The FBR is already struggling to achieve its annual revised tax collection target despite the fact that government had introduced mini budget in mid September this year. The FBR is facing a shortfall of Rs60 billion during the first four months of the ongoing fiscal year. The FBR’s collection stood at Rs 1,106 billion against target of Rs 1,166 billion during July-October current fiscal year.

Despite taking additional taxation measures, the PTI led coalition government has downward revised the tax collection target by Rs45 billion for the ongoing fiscal year 2018-19. The previous PML-N government had set the tax collection target for Federal Board of Revenue (FBR) at Rs4435 billion for the current financial year. However, the PTI government on Tuesday downward revised the target to Rs4390 billion despite introducing additional taxation measures.

The incumbent government is struggling to achieve the tax collection during ongoing fiscal year. The massive shortfall in tax collection would further widen the budget deficit of the country. The PTI led government had announced mini budget to restrict budget deficit at 5.1 percent of the GDP during current fiscal year. The government, in mini budget, had made fiscal adjustment worth of 2.1 percent of the GDP to restrict the budget deficit. The government had said that it was compelled to introduce amendments in Finance Bill otherwise Pakistan’s budget deficit would have swelled to Rs2.9 trillion (7.2 percent of the GDP) as against the budget estimates of Rs1.89 trillion in current fiscal year, a difference of Rs900 billion.