Breaking: New GST on Petrol & Diesel to Hike Fuel Prices After Budget
Federal Govt Approves 3-5% GST on Petroleum Products
The Economic Coordination Committee (ECC) has greenlit a 3-5% General Sales Tax (GST) on petrol (MS) and diesel (HSD), a move expected to push fuel prices up starting FY2025-26. The decision, approved by the Federal Cabinet on May 20, aims to relieve refineries from Rs. 34 billion in unclaimed input taxes while stabilizing the oil supply chain.
Key Takeaways
✔ New Tax: 3-5% GST on petrol & diesel (previously 0%).
✔ Price Impact: Estimated Rs. 4.12/litre hike (including margin adjustments).
✔ Why? Govt can’t pass Rs. 34B input tax burden to consumers under current pricing.
✔ IMF Factor: Full 18% GST rejected—would’ve spiked prices by Rs. 45/litre.
How Will This Affect You?
1. Fuel Price Breakdown
| Component | Increase (Rs./Litre) |
|---|---|
| GST Recovery (IFEM) | Rs. 2.09 (HSD), Rs. 1.07 (Petrol) |
| OMC Margin Hike | +Rs. 1.13 |
| Dealer Margin Hike | +Rs. 1.40 |
| Total Impact | ~Rs. 4.12/L |
2. Ripple Effects
🚗 Transport Costs: Higher fares for buses, trucks, ride-hailing.
📦 Commodity Prices: Food, goods to get pricier due to freight inflation.
💡 Electricity Bills: Diesel-powered generators = costlier backup power.
Why the Govt is Doing This
1. Refinery Relief
Rs. 34B stuck input taxes hurting oil supply chain.
IFEM mechanism to recover costs gradually.
2. IMF Compliance
Full 18% GST would need IMF nod—politically risky.
3-5% is a “middle path” to ease fiscal pressure.
3. Margin Boosts for OMCs & Dealers
OMCs (Oil Cos): +Rs. 1.13/L
Fuel Stations: +Rs. 1.40/L
Public & Expert Reactions
🔥 Backlash Expected: Already record-high fuel prices.
📉 Economic Strain: Inflation may spike further.
🛢️ Industry Relief: Refineries, OMCs welcome the move.
What’s Next?
📅 Implementation: Likely post-Budget 2025-26 (June).
⚖️ Political Fallout: Opposition may protest “anti-people” tax.
📊 IMF Review: Will this affect Pakistan’s loan program?
Final Verdict
This GST hike, though smaller than feared, will squeeze household budgets but aims to stabilize Pakistan’s oil industry. Brace for higher costs across the board.
💬 “When fuel prices rise, everything else follows.”
