The Petroleum Division plans to raise the issue of general sales tax (GST) exemption for petroleum products with the International Monetary Fund (IMF) to facilitate $6 billion in refinery upgrade investments, The Express Tribune reported, citing sources.
The move comes as an IMF mission is in Pakistan for programme review talks under the $7 billion Extended Fund Facility.
According to the news report, Petroleum Minister Ali Pervaiz Malik intends to address complaints from refineries, which reported a Rs40 billion loss during the last fiscal year due to the GST exemption. While a temporary measure allows the industry to collect Rs1.87 per litre to offset losses, the minister aims to design a full package to encourage plant modernization.
Sources added that inconsistent government policies have deterred Chinese investors from injecting capital into refineries. The government had previously assured the industry that GST would be capped at 5% in the FY26 budget, but this commitment was not fulfilled.
The Special Investment Facilitation Council has directed the finance and petroleum ministries to resolve the GST exemption issue, but a solution has yet to be implemented.
Industry representatives, including the Oil Companies Advisory Council (OCAC), have expressed concern that the prolonged uncertainty threatens $6 billion worth of investments aimed at producing environmentally friendly fuels.
The OCAC highlighted that continuation of the sales tax break undermines the objectives of the Pakistan Brownfield Oil Refining Policy 2023, which is being implemented inconsistently, raising doubts among stakeholders.
“Foreign investors are not ready to pump money into plant upgrade projects of refineries,” the council noted.
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