Buying petrol with cash may cost an extra Rs2-3 per litre

ISLAMABAD: The federal government is considering implementing separate tax and transaction rates for cash and digital payments across a number of sectors, including fuel pricing, in the next budget as part of its strategic plan for a “cashless economy”.
Among the many other things that Finance Minister Muhammad Aurangzeb has been pitching in recent days, this will be the most important move. He may unveil this at his June 10 budget speech.

In order to convey the message that the government is at least starting to lessen the burden where tax rates are too high, even if it is unable to drastically cut them, the prime minister has strictly instructed that the budget for the next year also include a lower tax rate for the salaried class, albeit by a narrow margin of 1 to 1.5 percentage points, said a report in Dawn.

According to the sources, policymakers had already been working on the administrative and technical aspects of the move to support the Federal Board of Revenue (FBR), which has so far failed miserably to document retail businesses in a way that could yield revenue outcomes over the past 20 years, despite numerous models and attempts.

The FBR, the Ministry of Petroleum, banks, financial institutions, and a few hired or co-opted consulting firms are thought to have participated in at least three consecutive consultative meetings with the finance minister to discuss technical solutions.

To encourage and force consumers and businesses to lower costs for documented transactions and raise expenditures for cash, the campaign against the cash-based economy would operate from both the top and bottom up. It seeks to progressively transition the economy from low-cash to, when technically possible, cashless transactions.

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According to an official, all gas stations nationwide, from Chaman to Khyber and Karachi to Azad Kashmir, would be mandated by law to offer digital payment methods in addition to cash, such as QR codes, debit and credit cards, and mobile payment services. Only digital transactions would be subject to the government-notified petroleum prices, with cash sales incurring an additional fee of roughly Rs2–3 per litre.

Although they would be pushed to use digital payments instead, consumers would still be able to make cash transactions at a higher rate.

The official stated that this would also assist in tracking petroleum shipments from ports and borders to refineries and depots, adding that it is a regulated environment that can be implemented right away.

In contrast, manufacturers and importers would be required to impose a regular general sales tax of 18 percent on digital payments made to their suppliers or retailers, and an additional 2 per cent GST would be applied to cash-paid purchases.

Customers would still be able to conduct cash transactions at a higher rate, but they would be encouraged to use digital payments instead.

This would also help track petroleum shipments from ports and borders to refineries and depots, the person said, adding that it is a regulated environment that can be put into place immediately.

Manufacturers and importers, on the other hand, would have to charge an additional 2 percent GST on cash-paid goods and a standard general sales tax of 18 percent on digital payments made to their suppliers or retailers.

According to sources, given its narrow reach, the new initiative may seem to be equivalent to the filer and non-filer categories for banking transactions, a policy that did not provide the intended outcomes. By using a carrot-and-stick strategy, the new regulation is anticipated to have a far wider reach and capture even minor and unofficial business activities.

A piece of legislation known as the Finance Bill 2025–2026 would mandate that all businesses, whatever of size, provide both digital and cash choices. Compared to digital payments, there would be an extra tax or fee associated with the cash transaction.

Simple QR codes and other digital solutions will also be used for payments under the new plan, in contrast to digital options like point-of-sale systems, which require additional investment in the form of POS equipment. According to reports, nations like Bangladesh, Indonesia, and India have made significant progress in this area.

According to another official, the FBR has failed to convince big companies to switch from cash to digital solutions, including event planners, jewelers, wedding venues, and other professionals including physicians, attorneys, and beauty parlors.

During a pre-budget meeting last week, Finance Minister Aurangzeb pledged to use digitization to transfer the tax burden from the documented sector and the salaried class to others. In order to maximize a cashless economy and improve documented transactions, he made important hints about the mandatory adoption of digital payments.

He also declared that the next federal budget would include “bold measures” to move the country’s economy in a strategic direction during a public event that same week.

In order to maximize revenue potential and get into the more than Rs9.3 trillion in circulation, he had already declared the government’s “war on cash.” In addition to streamlining procedures, he has been discussing the fullest use of technology, end-to-end digitization, and auditing in this regard.

A while back, the finance minister also said that under-filers and non-filers were avoiding paying almost Rs1.3 trillion in taxes on an individual basis. “If we want to join the G20 (a group of major economies), we have to declare war on cash,” he stated, adding that it is only feasible if transactions are recorded.

The minister claimed that Pakistan’s economy might be worth over $700 billion, which is much more than the $410 billion estimate now in place. This would result in over Rs7 trillion in tax evasion each year. He pledged, “We will ensure this documentation.”

In an effort to stop smuggling and adulteration, the government last month presented a historic law in the National Assembly that would digitally trace petroleum products from import and manufacturing to retail sales. In addition to harming the environment and automobile engines, the practice results in enormous financial losses of between Rs300 and Rs500 billion every year.

It is anticipated that the dual-pricing system in the next budget will support that legislative action and offer end-to-end traceability throughout the fuel supply chain.