Pakistan proposes 3-year jail term for unpaid petroleum levies

Pakistan's National Assembly has introduced legislation proposing stricter enforcement of petroleum and climate support levies, with financial penalties and possible license suspension for defaulting companies and imprisonment of up to three years for those held liable.

The Petroleum Products (Petroleum Levy and Climate Support Levy) (Amendment) Bill, 2026, was introduced on Wednesday and referred to the relevant committee for review.

The bill proposes making payment of the levies a mandatory condition of licenses issued by the Oil and Gas Regulatory Authority (OGRA), requiring oil marketing companies, refineries and other licensees to meet their payment obligations from the date their licenses are issued.

Refineries would have to deposit the levies in advance before petroleum products are released from refinery gates. Levies on imported petroleum products are already collected in the same manner as customs duties under the existing ordinance.

What penalties does the petroleum levy bill propose?

Companies that fail to pay the levies on time would face an annual surcharge equal to 1.5 times the prevailing six-month Karachi Interbank Offered Rate (KIBOR), or 12%, whichever is higher. The surcharge would accrue daily from the date of default until payment.

The legislation would also authorize the relevant tax and customs authorities to recover unpaid levies and surcharges under existing customs and sales tax recovery procedures.

OGRA would be empowered to suspend or revoke the licenses of companies that fail to pay the petroleum levy, climate support levy or related surcharges, in accordance with applicable laws and regulations.

Under the proposed punishment provisions, anyone who fails to pay the levies and surcharges in full could face imprisonment of up to three years, a fine equivalent to the unpaid levy or surcharge, or both.

Where the defaulting entity is a company, corporation, partnership or firm, its directors or partners could also be held liable unless they establish that the offense occurred without their knowledge or consent.

New reporting and audit requirements

The bill also proposes mandatory monthly reporting of levy payments by oil marketing companies, refineries and other licensees.

Companies would have to submit monthly payment statements to the relevant government division, along with an annual audited certificate verifying the accuracy of levies accrued and paid.

The certificate would have to be issued by an authorized audit firm during the first quarter of the following financial year, with the company, refinery or licensee bearing the audit costs.

The proposed amendments would also establish a digital mechanism for tax and customs authorities to share information on levy payments and outstanding surcharges with the Petroleum Division.

Outstanding levies and surcharges would remain recoverable under the amended law, while liabilities and recovery proceedings arising before its implementation would be preserved.

The legislation seeks to amend the Petroleum Products (Petroleum Levy and Climate Support Levy) Ordinance, 1961, by revising definitions of companies, oil marketing companies and refineries, strengthening payment obligations and removing specified existing schedules.

Several related enforcement measures were proposed in the June 2026 Finance Bill but removed before its passage.