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Petrol and diesel prices rise again

June 18, 2013

ISLAMABAD: For the second time in a week after the federal budget, the prices of petroleum products went up by up to Rs2.70 per litre on Monday with immediate effect because of imposition of 19 per cent general sales tax on 95 per cent retailers, instead of the standard rate of 17pc.

The ex-depot price of petrol rose by Rs1.72 per litre to Rs102.35, high speed diesel (HSD) by Rs1.80 to Rs107.30 and kerosene by Rs1.60 to Rs96.19. The price of High Octane Blending Component (HOBC) was up by Rs2.70 per litre to Rs139.10 and that of light diesel oil (LDO) by Rs1.54 to Rs91.44.

On June 13, the price of petrol was jacked up by 86 paisa per litre, HSD by 90 paisa, kerosene by 80 paisa, HOBC by Rs1.35 and LDO by 77 paisa as a result of an increase in standard GST rate from 16 to 17pc.

The two adjustments within a week led to a cumulative increase in prices of petrol by Rs2.58 per litre, HSD by Rs2.70, HOBC by Rs4.05, kerosene by Rs2.40 and LDO by Rs2.31.

An anomalous situation arose when oil marketing companies (OMCs) came to know about another amendment to GST laws introduced in the June 12 budget under which retailers, dealers and pump owners not registered as taxpayers or without tax numbers are required to pay an additional 2pc GST.

An official in the petroleum ministry told Dawn that about 95pc retailers and pump stations were unregistered because previous laws had exempted them while GST on petroleum products was worked out and recovered at the time of fixing of prices by the government or by the OMCs at the time of selling the products to dealers and retailers.

Since the unregistered retailers are subject to 2pc additional GST, or withholding tax as it is technically described, the OMCs led by Pakistan State Oil faced a new dilemma — 17pc GST on 5pc registered retailers and 19pc on 95pc unregistered ones.

A spokesperson for the PSO told Dawn that it had no option but to follow the law. “We are selling petroleum products at 17pc GST to registered retailers and 19pc to unregistered retailers. But it is creating confusion and a chaotic situation which will result in disruption in the supply chain”.

He said the situation would further aggravate as unregistered retailers were reluctant to lift the products and people would queue up at the tax-registered pumps for lower prices and as a result these pumps would be unable to cope with the jump in demand, maintain supplies and ultimately would go dry.

The PSO took up the matter with Petroleum Minister Shahid Khaqan Abbassi, who had earlier promised to resolve the issue, but he later expressed his inability to convince the finance ministry and the FBR to change the law because of its applicability to all sectors of economy.

A similar situation had emerged 10 years ago when the FBR issued an SRO to exempt all petroleum dealers and retailers from GST registration.