OCAC calls for ending to super tax, sales tax exemption in FY26 budget

• The impact for FY 2025 is expected to be more than Rs18 billion.
• Industry wants minimum tax on Refineries and OMCS slashed to 0.25%.
• OCAC seeks restoration of Commissioner’s exemption certificate powers.

ISLAMABAD: The oil industry has submitted its budget proposals for the fiscal year 2025–26, urging the Federal Board of Revenue (FBR) to abolish the super tax, withdraw the sales tax exemption and final tax regime on petroleum product exports, The News reported.

In a three-page letter addressed to the FBR chairman on 7 April 2025, the Oil Companies Advisory Council (OCAC) called for the removal of the sales tax exemption introduced under the Finance Act 2024. The exemption currently applies to Motor Spirit (petrol), High-Speed Diesel, Kerosene, and Light Diesel Oil.

The OCAC argued that, as petroleum pricing is regulated, the disallowance of input tax has raised operational costs and hampered the industry’s infrastructure development efforts.

The impact for FY 2025 is expected to be more than Rs18 billion, recommending that petroleum products should be taxable.

Seeking the abolishment of the Super Tax, the OCAC said the Super Tax, originally introduced as a one-time levy, has been extended well beyond its initial scope.

In light of the current economic climate and the need to support documented and responsible businesses, it strongly recommended abolishing the Super Tax for the tax year 2025-26.

The OCAC has also recommended that the Minimum Tax applicable on Refineries and OMCS should be reduced to 0.25% and abolished in the subsequent year.

The Oil Companies Advisory Council has also sought to reinstate the Commissioner’s power to issue Exemption Certificates.