Refinery CEOs call for urgent action as GST changes threaten industry viability

ISLAMABAD: The CEOs of Pakistan’s major oil refineries have urgently appealed to Finance Minister Senator Muhammad Aurangzeb for intervention regarding the recent removal of the General Sales Tax (GST) exemption on petroleum products.

In a joint letter addressed to the finance minister, leaders from Attock Refinery Limited, Cnergyico PK Limited, National Refinery Limited, Pakistan Refinery Limited, and Pak-Arab Refinery Limited outlined the daunting challenges presently confronting the oil refining sector.

The letter highlights significant concerns about the changes enacted in the Finance Act 2024, which have shifted the sales tax status of petroleum products—including petrol, high-speed diesel, kerosene, and light diesel oil—from zero-rated to exempt. This legislative change has resulted in the disallowance of input sales tax claims, leading to a considerable increase in operational and capital costs for local refineries.

The CEOs stressed this shift was jeopardising the financial sustainability of their planned upgrade projects, infrastructure investments, and daily operations.

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They warned that if this exemption is maintained, it could lead to a drastic erosion of profitability and impose significant financial strain on the industry. “This situation threatens the progress and viability of essential capital-intensive projects and undermines the goals of the Brownfield Refining Upgradation Policy approved by the government in August 2023,” they stated.

Despite persistent coordination efforts over the past seven months with the Ministry of Energy (Petroleum Division), the Oil and Gas Regulatory Authority (OGRA), and the Federal Board of Revenue (FBR), the issue remains unresolved.

“The ongoing delay in addressing this matter is jeopardizing the survival of Pakistan’s oil refining sector and continues to create substantial challenges,” the refineries cautioned, urging the finance minister for immediate action to facilitate a swift and effective resolution.

To that end, representatives from the oil refining industry have requested an immediate meeting with the finance minister to discuss and resolve this pressing issue.