FBR authorised to collect levies on petroleum products

ISLAMABAD: The federal government has empowered the Federal Board of Revenue (FBR) to collect the Petroleum Development Levy (PDL) and Climate Support Levy (CSL) on petroleum products nationwide, formally assigning the tax authority to act as an agent of the Ministry of Petroleum and the Petroleum Division.

According to official documents, the FBR has issued SRO 800(I)/2026, making changes to the Sales Tax Rules 2006. The notification sets out a revised arrangement under which the FBR will collect both levies on behalf of the relevant ministries.

The new system also introduces a domestic sales invoice (DSI) mechanism for levy collection, aimed at bringing greater uniformity in reporting and improving compliance throughout the petroleum supply chain.

Under the revised framework, all registered buyers of petroleum products, including petrol pumps, will have to submit detailed transaction information in a prescribed format. Officials said this would require full disclosure of sales and the levies charged at every stage.

Under Annexure-L of the amended rules, registered entities will be required to provide buyer information including National Tax Number (NTN), Computerised National Identity Card (CNIC) numbers, names of purchasers and the nature of the transactions. They must also report HS codes, sale dates, transaction type, quantity sold in litres and the total sales value.

In addition, businesses will have to separately declare the rate and amount of PDL and CSL applied to each transaction. Where exemptions or zero-rated supplies apply, the relevant SRO and schedule references must also be mentioned along with the number of items sold.

Changes to reporting mechanism

FBR officials confirmed that the board will now serve as the collection agent for the Ministry of Petroleum and the Petroleum Division for both levies. They said the amendments specifically revise Annexure-L of the monthly sales tax return form STR-7 under the Sales Tax Rules 2006.

Officials further said the CSL was introduced through the Finance Bill 2025 and took effect from July 1, 2025. According to the officials, the levy is meant to support financial measures addressing environmental and climate-related challenges.

They added that incorporating STR-7 into the monthly tax return system formally establishes the collection process for both CSL and PDL, while also strengthening documentation and reporting standards.

A DSI system has also been put in place to facilitate implementation of the levies and improve tracking of petroleum product transactions across the supply chain.

FBR officials said there has been no change in the existing tax rates or the overall levy structure. They clarified that the latest revision concerns only the collection procedure, with the FBR acting as an intermediary for the concerned ministries under the existing legal framework.