FBR slaps Rs80/litre FED on 3 POL products

Islamabad: The Federal Board of Revenue (FBR) has introduced an additional Federal Excise Duty of Rs 80 per litre on three petroleum products from July 1, 2026. These products include petroleum top naphtha, white spirit/mineral turpentine oil (MTT), and solvent oil. The FBR issued sales tax budget instructions to field formations to prevent adulteration in petroleum products through Federal Excise Duty (FED) intervention.

According to the FBR's instructions on the Finance Act 2026, petroleum products are subject to petroleum development levy (PDL), but petroleum top naphtha, white spirit/ mineral turpentine oil (MTT), and solvent oil are not. Some dishonest individuals have exploited this difference by mixing these products into PDL chargeable items and selling them at higher prices.

To address this issue, the FBR has imposed an FED of Rs 80 per litre on these three products in sales tax mode. However, for industries that use these products as industrial input material, a contingency mechanism has been provided for exclusion or exemption from the duty, provided the final product is either exempt from sales tax or both the supplier and manufacturer are integrated with the Board's computerized system for issuing digital invoices, subject to specified conditions.

The FBR imposed the FED on these petroleum products by adding S. No. 65 of Table-1 of the First Schedule to the Federal Excise Act, 2005. These goods have also been included in the Second Schedule for the imposition of FED in sales tax mode, allowing registered persons to adjust the duty against output sales tax. Upgrading refineries is crucial to meet modern environmental standards, including cleaner fuel specifications, improved emission controls, and reduced carbon and sulfur intensity.

Moreover, major petroleum products of a refinery are not subject to sales tax. During refinery upgradation, scheduled turnaround, maintenance, and overhaul of a refinery involve importing expensive machinery, equipment, and other parts, which are subject to sales tax. In response to this, the FBR has granted exemption from sales tax on specified items with prior approval from the relevant Division.