The Consumers Pay Rs80/Litre Tax on Petrol and Diesel
Consumers in Pakistan are paying almost Rs80 per litre in taxes on petrol and diesel, even as the government maintains zero percent sales tax on petroleum products.
Staff Report
Heavy Reliance is on Petroleum Levy on petroleum products to pocket money. According to official price buildup data for mid-August, the Petroleum Levy (PL) remains the largest tax on fuel. The PL stands at Rs77.01 per litre on high-speed diesel (HSD) and Rs78.02 per litre on petrol (PMG). The levy has become a key revenue stream for the federal government, which uses it to meet fiscal deficit targets agreed with the International Monetary Fund (IMF).
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Additional Surcharges Add to Burden
Alongside the levy, consumers also pay a Carbon Surcharge Levy (CSL) of Rs2.50 per litre on both fuels. This brings the total tax burden to Rs79.51 per litre on diesel and Rs80.52 per litre on petrol.
Other cost elements, including the Inland Freight Equalization Margin (IFEM), dealer margins, and distribution margins, are not categorized as taxes but are passed on to consumers within the retail price.
Share of Taxes in Final Fuel Price
For mid-August, the maximum depot price of diesel was set at Rs272.99 per litre, with taxes making up 29% of the final price. Petrol carried a depot price of Rs264.61 per litre, of which just over 30% comprised taxes.
Effectively, nearly one-third of the retail price of every litre of fuel in Pakistan is absorbed by government levies and surcharges.
Policy and Fiscal Implications
The removal of sales tax is framed as a measure to provide relief to households coping with high inflation. However, reliance on petroleum levy collections has drawn criticism from analysts, who argue that the burden falls disproportionately on fuel consumers.
Unlike the General Sales Tax (GST), which is shared with provinces under the National Finance Commission (NFC) Award, the petroleum levy is retained exclusively by the federal government.OGDCL Makes Oil Discovery in Sindh
Global Oil Prices vs Local Taxation
Despite fluctuations in international oil prices, Pakistani consumers see little relief due to the rigid tax component. For instance, ex-refinery prices for diesel fell by Rs13.20 per litre between August 1 and August 16, but the reduction was not fully reflected at the pump because of the heavy levy.
Consumer Impact
Transporters, farmers, and industrial users—particularly dependent on diesel—are among those most affected. Diesel’s role in agriculture and freight means that higher fuel prices directly push up food inflation and logistics costs, reducing any potential benefit from lower global oil prices.
In effect, while the government promotes the absence of sales tax as a relief measure, consumers continue to shoulder nearly Rs80 per litre in indirect taxation through levies and surcharges, highlighting Islamabad’s dependence on fuel-based revenue at the expense of households and businesses.
