ISLAMABAD - Although the Federal Board of Revenue (FBR) has surpassed tax collection target in nine months of the current fiscal year, but the continuous zero rated general sales tax on oil products is denting tax collection efforts, which might affect the overall tax collection target.
The FBR is not charging GST on petroleum products to keep prices at lower side to protect masses from massive hike. An official of the FBR informed The Nation that government had faced Rs45 billion shortfall in tax collection in the month of March as GST on all petroleum products has been reduced to zero. “The FBR has faced tax collection shortfall of Rs29 billion by not charging GST on petroleum products in March,” he said. Apart from March, FBR has surpassed the tax collection target by Rs247 billion in first nine months (July to March) of the current fiscal year, he added.
Prime Minister Imran Khan on February 28 2022 had announced the slashing of petroleum products’ price by Rs10 per litre and electricity tariff by Rs5 per unit in order to provide relief to the masses. He said that there would be no increase in petrol and electricity prices until the next budget (June this year). Although, the decision has protected people from increasing petroleum product products prices but the tax department of the country is suffering in terms of tax collection. The revenue impact of Sales Tax exemptions provided to fertilizers, pesticides, tractors, vehicles, and oil & ghee come to Rs 18 billion per month. Similarly, zero rating on pharmaceutical products has cost FBR Rs 10 billion in sales tax during the month of March, 2022.
“The tax collection shortfall might further increase in remaining three months (April to June) of the current (fiscal) year as oil prices are much higher in international market as compared to Pakistan,” he explained. He further said that apart from oil products, the government is also giving tax relief on other items including ghee, oil, fertilizers and pesticides, which are also denting tax collection efforts of the Federal Board of Revenue.
The official was optimistic that government would achieve the annual tax collection target of Rs6.1 trillion during current fiscal year despite giving tax concessions to several items. “Tax collection would have gone much higher than the target if the government has not reduced the GST on oil products to zero,” he added.
According to the provisional information, FBR has collected net revenue of Rs 4,382 billion during July, 2021 to March, 2022 of current Financial Year 2021-22, which has exceeded the target of Rs247 billion. This represents a growth of about 29.1% over the collection of Rs. 3,394 billion during the same period, last year.
It is worth mentioning here that the FBR’s initially tax collection target for the current fiscal year was Rs5.83 trillion, which was later revised upwards to Rs6.1 trillion on the directions of the International Monetary Fund (IMF).
