As international oil prices continue to fall, the government is preparing to slash fuel prices. However, the government is contemplating a tax increase to combat a growing revenue shortfall, which could partly offset the anticipated price decrease. The Federal Board of Revenue (FBR) is reportedly proposing a one per cent increase in all withholding tax rates effective from October 1, 2024, should the revenue shortfall persist.
Petrol prices are expected to decrease by Rs11 per litre, while high-speed diesel (HSD) could see a reduction of Rs11.5 per litre. However, this price adjustment depends on the government refraining from raising the petroleum levy by Rs5 per litre for the second half of September. In a move to bolster tax collection efforts, the government aims to address the revenue gap of Rs98 billion experienced by the FBR during July and August 2024.
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Despite the potential tax increase, consumers are likely to benefit from lower fuel prices. However, should the government decide to raise the petroleum levy, the reduction in fuel prices could be less substantial, potentially around Rs5-6 per litre. Nevertheless, it may be challenging for the government to increase the petroleum levy, given the declining trend in petroleum sales/consumption within the country.
The expected drop in fuel prices is a result of decreasing international oil prices effective from September 16, 2024. If approved, consumers could pay as low as Rs247.60 per litre for petrol and Rs251.75 per litre for HSD from September 16 to September 30, 2024.
