ISLAMABAD: The Federal Board of Revenue (FBR) announced on Friday that dealers and retail outlets of petrol pumps are exempt from the Advance Income Tax (AIT).

The FBR’s announcement comes amidst an ongoing country-wide strike by petroleum dealers, who vehemently opposed the government’s decision to subject the sector to the collection of AIT from petrol pumps under section 236H of the Income Tax Ordinance (ITO).

At the same time, the Finance Act 2024 has expanded the scope of 236H, which allows suppliers to deduct AIT to retailers at 0.5pc for filers and 1pc for non-filers. As a result of this budget decision, it is believed that petroleum dealers will face the same conditions.

In a clarification to the Director General Oil of Petroleum Division, the FBR made it clear that the income of oil marketing companies (OMCs) distributors/retailers is subject to the final tax regime under section 169 of the ITO. It further stated that the dealers/retail outlets of OMCs had fully and finally discharged their tax liabilities.

Currently, dealers/retail outlets (petrol pumps) work on fixed dealer margins, which are regulated by the government. This is a price-regulated sector. Section 156A in the ITO deals specifically with the tax on petroleum products sold at petrol pumps.

Section 156A states that anyone who sells petroleum goods to a petrol pump operator must deduct tax from the commission or discount provided to the operator at the stipulated rate. This will be the final tax on the income generated by the sale of petroleum products.

According to the FBR, the petroleum dealers will continue to be taxed at the existing mechanism under section 156A.

Published in Dawn, July 6th, 2024