Islamabad: The federal government has imposed a Federal Excise Duty (FED) of Rs80 per litre on three specific products to prevent adulteration of petroleum products.
According to the Federal Board of Revenue (FBR), this duty is effective from July 1, 2026. This will apply to petroleum top naphtha, white spirit or mineral turpentine oil (MTT) and solvent oil.
The FBR, in its instructions for the financial year 2026-27, stated that general petroleum products are subject to the Petroleum Development Levy (PDL). On the contrary, the above three products were not included in the ambit of this levy.
According to the FBR, this difference was misused by some elements. These products were being mixed with petroleum products on which PDL was levied. This process created a way to sell low-cost products at higher prices.
The main objective of the new FED is to stop this trend and improve the quality of petroleum products. The FBR has clarified that this move is not directly equivalent to imposing an additional tax of Rs 80 per litre on petrol or diesel for the general consumer.
These three products have been included in the ambit of FED through a change in the tax system. For this purpose, the FBR has included a relevant clause in the First Schedule of the Federal Excise Act, 2005.
The government has also put in place a specific mechanism for industrial users. Industries that use these products as raw materials will be able to get exemption or exemption from duty if certain conditions are met.
According to the FBR, this facility may also be available in cases where the finished products are exempt from sales tax. Businesses whose suppliers and manufacturers are connected to the board’s computerized system and issue digital invoices can also benefit under certain conditions.
The new mechanism also provides for the possibility of adjusting the FED levied through the sales tax system. This will allow registered businesses to adjust the relevant duty against their output sales tax.
The important aspect of this move for the government is not only to generate additional revenue but also to curb the problem of adulteration of petroleum products. Misuse of price, tax and product nature differences in this sector can affect transparency in the market.
The new FBR guidelines are an attempt to close this gap to discourage the mixing of such products with other petroleum products to gain undue commercial advantage.
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