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Govt finds error in diesel price build-up

Govt finds error in diesel price build-up

ISLAMABAD: The government on Friday finalised two options for reducing the price of high-speed diesel (HSD) on the desire of the Chief Justice of Pakistan Saqib Nisar.

A senior official told Dawn the government was found on the wrong foot in the HSD pricing build up and was now ready to reduce its general sales tax to 24pc or 17pc. The apex court is to take up the options on the weekend.

He said the Oil and Gas Regulatory Authority (Ogra) had been assuming GST on HSD at 31pc in summaries to the government on the advice of the finance ministry even if the notified GST rates were on the lower side. Based on an artificially inflated GST rates of the previous month, the PML-N government used to claim credit for not passing on full price increase recommended by Ogra and protect its revenue stream at the same time.

Comes up with two options to cut HSD price

This time again, the sources said, the HSD price for July was proposed on the basis of 31pc GST while the actual notified rate was only 24pc. The Petroleum Division proposed to the finance ministry to work out HSD prices on the basis of 24pc GST but this was rejected by the caretaker finance minister and the GST was increased again to 31pc.

Also, the GST on other products was also increased from 12pc to standard rate of 17pc.

The official said the Petroleum Division now proposed two options for HSD to satisfy the Supreme Court in view of its higher inflationary impact and protect the prices of other products with 17pc GST.

The official said the government was currently collecting about Rs28.23 per litre on HSD on the basis of 31pc GST which would come down to Rs21.86 per litre if the GST rate is reduced to 24pc.

Likewise, the tax on HSD would drop to Rs15.50 per litre if standard GST rate of 17pc was applied. The total revenue loss on account of reduction in GST rate on HSD to 17pc from 31pc had been estimated at Rs4bn.

The official hoped the Supreme Court may find standardised 17pc GST on all products for the purpose of uniformity. He said that at existing rates, the government estimated to recover about Rs55bn per month on all petroleum products, including about Rs30bn on HSD alone, followed by slightly over Rs22bn on petrol and almost Rs500m on other products.

The apex court is ceased with a case on the taxation on petroleum products and had called next month all the decision makers from the Petroleum Division to Ogra, Federal Board of Revenue and the Ministry of Finance.

Currently, the government is charging 17pc GST on petrol, LDO, HOBC and kerosene and 31pc on HSD. In addition, the government is also charging Rs8 per litre petroleum levy on HSD, Rs10 per litre on petrol and Rs6 and Rs3 per litre on kerosene and light diesel oil (LDO) respectively.

Published in Dawn, July 7th, 2018

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