FBR imposes Rs80 per litre Federal Excise Duty on three petroleum products
Effective July 1 2026, the Federal Board of Revenue will levy Rs80 per litre FED on petroleum top naphtha, white spirit/mineral turpentine oil and solvent oil, aiming to curb adulteration and protect revenue.
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Desk Analysis
How This Affects the Exchange
Sector Effect
Negative · Do not buy
Higher FED on key petroleum inputs raises costs for Oil & Gas companies, so avoid buying.
Sectors & Direction
Desk read
Desk call: Do not buy · Negatively affected
- Oil & GasNegatively affected
Companies
Companies Mentioned
- OGDC· Negatively affected · Do not buy
Mentions in This Briefing
Sectors: Oil & Gas — Negative · Do not buy. PSX tickers: OGDC. Higher FED on key petroleum inputs raises costs for Oil & Gas companies, so avoid buying.
Full Story
Open on Business Recorder## New Federal Excise Duty on select petroleum products
The Federal Board of Revenue (FBR) announced that, from 1 July 2026, a Federal Excise Duty (FED) of Rs 80 per litre will be imposed on three petroleum derivatives: petroleum top naphtha, white spirit/mineral turpentine oil (MTT) and solvent oil. The move is part of the Finance Act 2026 and targets the practice of mixing these untaxed products with those subject to the Petroleum Development Levy (PDL) to fetch higher prices.
## Rationale and regulatory framework
Under current law, the three products are exempt from PDL, creating a price differential that some traders exploit. By bringing them under a sales‑tax mode FED, the FBR seeks to eliminate this arbitrage. The duty is added through S. No. 65 of Table‑1 of the First Schedule to the Federal Excise Act 2005 and listed in the Second Schedule, allowing registered persons to offset the FED against output sales tax.
## Relief mechanisms for industrial users
Recognizing that many manufacturers use these chemicals as inputs, the FBR introduced a contingent exemption. Companies that either produce final goods exempt from sales tax or operate fully integrated digital invoicing systems may qualify for relief, subject to conditions set by the Board.
## Implications for refinery upgrades and imports
The statement also highlighted the need for refinery modernization to meet cleaner‑fuel standards. While major refinery outputs remain outside sales‑tax scope, the import of high‑value machinery and parts required for upgrades is taxable. The FBR noted that sales‑tax exemptions on such items can be granted with prior approval from the relevant division.
## Market perspective
The additional cost burden on petroleum‑based inputs is expected to pressure downstream industries, particularly those in the Oil & Gas sector that rely on these feedstocks. Companies may face higher operating expenses unless they can pass the cost onto customers or secure the stipulated exemptions.