FBR exempts petrol pumps from advance income tax amid dealers’ strike M Haris

The Federal Board of Revenue (FBR) announced that dealers and retail outlets of petrol pumps are exempted from the Advance Income Tax.

This announcement comes amid a nationwide strike by petroleum dealers opposing the government’s decision to impose an Advance Income Tax on petrol pumps under Section 236H of the Income Tax Ordinance.

The Finance Act 2024 has expanded the scope of Section 236H, which permits suppliers to deduct Advance Income Tax from retailers at a rate of 0.5% for filers and 1% for non-filers. This raised concerns that petroleum dealers would be subjected to these conditions.

In a clarification to the Director General Oil of the Petroleum Division, the FBR explained that the income of oil marketing companies (OMCs) distributors and retailers falls under the final tax regime specified in Section 169 of the Income Tax Ordinance. The FBR confirmed that dealers and retail outlets of OMCs have fully discharged their tax liabilities.

Currently, petrol pump dealers and retail outlets operate on fixed dealer margins regulated by the government. This is a price-regulated sector, with Section 156A of the Income Tax Ordinance specifically addressing the tax on petroleum products sold at petrol pumps.

Section 156A mandates that anyone selling petroleum goods to a petrol pump operator must deduct tax from the commission or discount given to the operator at a specified rate, which serves as the final tax on the income generated from petroleum products.

According to the FBR, petroleum dealers will continue to be taxed under the existing mechanism provided by Section 156A.