ISLAMABAD, Sept 8: The government collected about Rs245 billion as sales tax and other levies on oil and gas during financial year 2007-08 and subsidised their prices by about Rs175 billion, earning a net profit of about Rs70 billion on oil and gas business.
The government has been talking about subsidies it provided to the consumers on oil products without mentioning much higher revenues it recovered from the consumers on the same products.
Had the government removed taxes and surcharges on petroleum products with unprecedented increase in price in international market, there would have been no need for subsidies and the economic growth would have remained unaffected, a government official said.
Instead, higher economic growth might have resulted in higher tax revenues, he said, adding this could be one reason for the decline in revenue collection from 21.7 per cent of GDP in 2006-07 to about 19.2 per cent of GDP in 2007-08.
According to the financial data released by the federal government last week, the government collected about Rs89 billion as development surcharge, royalties and others discounts on oil and gas during 2007-08.
Informed sources told Dawn on Monday that the government separately recovered general sales tax of about Rs120 billion on oil products and about Rs35 billion on natural gas sales during last financial year. As such, total revenue collected on the sale of oil products and natural gas stood at Rs245 billion.
In contrast, the government provided about Rs175 billion as subsidies on oil products during the year 2007-08. Therefore, the government earned about Rs70 billion of net profit on oil and gas business as a whole after paying Rs175 billion in subsidies. Official data suggests that the government recovered about Rs14.5 billion as development surcharge on petroleum products, Rs20.7 billion development surcharge on natural gas, Rs18.6 billion discount retained on crude oil and another Rs35 billion as royalties on oil and natural gas, making a total of Rs89 billion.
These sources said as the petroleum prices increased in the international market, the government’s share proportionately went up because of 15 per cent general sales tax. For example, the GST on motor spirit that stood at Rs7 per litre on petrol in February 2007 increased to about Rs12 per litre in July 2008, and jacked up government revenue by about Rs5 per litre.
Likewise, the GST on HOBC (High Octane Blending Component) increased from about Rs8.50 per litre in February to Rs13 per litre in July 2008, providing a windfall of about Rs4.50 per litre.
The GST on kerosene also increased from Rs4.60 per litre in February to about Rs8 per litre by end of June 2008. The GST on diesel also increased from about Rs4 per litre in February 2008 to Rs8 per litre in June 2008, providing a substantial revenue increase to the government.
Apart from GST, the government also kept on charging development surcharge on petrol and HOBC that fluctuated between Rs3-12 per litre with the exception of a couple of months when surcharge was done away with on temporary basis.
In addition to revenue collection on oil products, the government kept on charging 15 per cent GST on the sale of natural gas as total sales revenue of two utilities –SNGPL and SSGCL – stood at about Rs200 billion in 2007-08.
Oil and gas sector was the single largest contributor in the Rs385 billion of total general sales tax collection during 2007-08, the officials said.
