Federal Excise on Petroleum Products — Naphtha, Solvent and Turpentine (Budget 2026-27)

New excise on key industrial petroleum products

Budget 2026-27 imposes Federal Excise Duty (FED) on naphtha, solvent and turpentine. These are not consumer fuels — they are industrial inputs and intermediates used in petrochemicals, paints, coatings, adhesives and a range of manufacturing processes. Bringing them under FED raises the cost of these inputs and affects any business that buys, imports or processes them.

What these products are used for

• Naphtha: a petroleum fraction used as a petrochemical feedstock and industrial solvent.
• Solvent: used across paints, coatings, cleaning and chemical processing.
• Turpentine: used in paints, varnishes and certain chemical applications.

Because they sit upstream in many supply chains, a levy on them can ripple into the cost of downstream finished goods.

Why the government imposed it

Petroleum-related products are a familiar target for excise — they offer a sizeable, trackable base and align with revenue and consumption-management objectives. Within Budget 2026-27, FED on naphtha, solvent and turpentine sits alongside new levies on base and lubricating oil, e-liquids and luxury vehicles, balancing the reliefs granted to foreign travel, sports/electrolyte beverages and acetate tow. The overall excise package raises revenue from selected industrial and discretionary goods while easing essentials.

Who is affected

• Petrochemical and chemical manufacturers using these as feedstocks or solvents.
• Paint, coating and adhesive producers dependent on solvents and turpentine.
• Importers and distributors of these products.
• Downstream buyers who may see input-cost increases passed through.

Managing the cost and the compliance

The new FED means affected businesses must update their input costs, decide on pricing pass-through, and apply the excise correctly on every relevant transaction. Budget 2026-27 also modernises excise administration with a faceless audit mechanism under Section 7A, e-invoicing and production monitoring — so accurate, auditable records are essential, not optional.

Zaffre Axon supports this end to end. Zaffre Tech's platform configures excise, sales tax and withholding centrally and applies them consistently across invoices and finance, so a new levy like FED on naphtha flows through correctly to costing and billing. The Zaffre HRM module keeps payroll, EOBI and allowances compliant for the teams running these operations.

A practical checklist

• Identify which purchased or imported inputs now attract FED.
• Update standard costs and recompute margins.
• Apply the correct excise on transactions and invoices.
• Adopt e-invoicing and keep audit-ready production and purchase records.

Bottom line

By imposing FED on naphtha, solvent and turpentine, Budget 2026-27 raises the cost of important industrial inputs. Affected businesses should re-cost promptly, apply the excise accurately and keep records ready for faceless audit.

References: Finance Act 2026 (Federal Budget 2026-27); Federal Excise Act 2005; FBR.

Book a demo of Zaffre Axon to see how Zaffretech keeps excise, costing and tax compliant after new levies like this.