Petroleum minister, PM back industry push to fix sales tax snag threatening refinery modernization
The government has assured the refinery sector that their tax issues will be resolved in the upcoming budget that was affecting the refineries and oil marketing companies, as the petroleum minister has taken up this issue with the ministry of Finance and the Prime Minister.
A senior official said, since the government know the importance of the sector, especially in situation when the recent Pakistan-India standoff gave it more importance, it will help boost its support for the upgrade.
The refining industry has been raising serious concerns over the financial challenges arising from the Finance Act 2024, which changed the sales tax status of petroleum products from zero-rated to exempt supplies—a shift that significantly impacts the industry’s tax treatment.
They say the exemption has led to the disallowance of input sales tax claims, causing a substantial rise in operational and capital costs. This, in turn, is adversely affecting infrastructure development and critical refinery upgrade projects needed to modernize Pakistan’s refining sector.
The refineries argued that the sales tax exemption contradicts the Brownfield Refining Upgradation Policy, which was approved in August 2023 to incentivize refinery modernization and attract investment. It will help encourage investment in upgrade projects.
On Tuesday, the refiners assure $6bn upgrade to Petroleum Minister Ali Pervaiz Malik if taxation issues are resolved in upcoming budget. CEOs of Pakistan’s refineries met Federal Minister for Petroleum to Appreciate Resolution of FY25 Sales Tax Issue, Hopeful for Permanent Solution in Upcoming Budget.
They express their gratitude for the government’s decisive action in resolving the long-standing sales tax issue affecting the refining & OMC sectors.
The meeting underscored the government’s firm commitment to ensuring energy security and facilitating refinery upgrade projects worth over USD 6 billion, which are critical to modernizing Pakistan’s refining infrastructure. The resolution of the sales tax issue marks a significant milestone in creating a conducive environment for investment and operational efficiency in the oil refining industry.
The CEOs lauded the Petroleum Minister’s proactive approach and the PM’s personal efforts/support in addressing key challenges faced by the sector. They reiterated their commitment to advancing refinery upgradation projects in line with Prime Minister’s vision for enhancing fuel quality, reducing emissions, and promoting clean energy solutions.
Minister Ali Pervaiz Malik emphasized that the government is fully dedicated to fostering a sustainable energy ecosystem. “The steps to address the sales tax issue reflects our unwavering resolve to support the refining sector, which plays a pivotal role in Pakistan’s energy security and economic growth. The refinery upgrades will not only enhance production efficiency but also align with our goal of transitioning toward cleaner and more sustainable energy sources,” he stated.
Furthermore, he highlighted that policy consistency is the corner stone for viability of any sector, fostering investor confidence.
The refinery upgradation projects, once completed, will significantly improve fuel standards, reduce reliance on imported petroleum products, and contribute to environmental sustainability by producing Euro-V compliant fuels. This initiative is at heart of the government’s broader strategy to strengthen the energy sector and ensure long-term economic stability through foreign investments.
The delegation included Zahid Mir-CEO Pakistan Refinery Limited, Irtiza Qureshi-MD PARCO, Adil Khattak-CEO Attock Refinery Limited, Amir Abbasi-CEO Cynergico, Asad Hasan – CEO National Refinery Limited.