KARACHI: Federal Board of Revenue (FBR) has recorded a sharp 163% increase in withholding income tax collection from petroleum products over the past five years, largely driven by higher fuel prices and rising consumption.
Official figures show that total withholding tax collection from petroleum products climbed to Rs20 billion in fiscal year 2024-25, up from Rs7.59 billion in FY2020-21.
The tax is collected under Section 156A of the Income Tax Ordinance, 2001, at a rate of 10% on petroleum product sales. It is deducted from commissions or discounts provided to petrol pump operators by suppliers and is treated as a final tax on income arising from these transactions.
Under the applicable law, suppliers are required to deduct the tax at source when selling petroleum products to petrol pump operators, effectively settling the tax liability at the point of transaction.
Data from the FBR indicates consistent year-on-year growth. Collections increased to Rs10.31 billion in FY2021-22, rose to Rs11.82 billion in FY2022-23, and further climbed to Rs14.56 billion in FY2023-24 before reaching Rs20 billion in the latest fiscal year.
Officials attribute the sustained increase to elevated domestic petroleum prices, improved compliance across the fuel supply chain, and enhanced monitoring measures. Higher global oil prices have also contributed by increasing the overall value of taxable transactions.
Tax authorities have strengthened oversight mechanisms within the petroleum sector to ensure accurate deduction and reporting at both retail and distribution levels.
Analysts note that the petroleum sector continues to play a key role in Pakistan’s indirect tax system, particularly through withholding taxes that enable efficient collection at source.
The FBR reiterated its commitment to broadening the tax base and reinforcing enforcement measures to support overall revenue growth.
