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 many 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 common target for excise because the base is large and easy to track, and taxing them serves both revenue and consumption goals. 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. Overall, the excise package takes more from selected industrial and discretionary goods and less from 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 updates excise administration with a faceless audit mechanism under Section 7A, e-invoicing and production monitoring, so you need accurate records that will hold up in an audit.

Zaffre Axon covers this from start to finish. Zaffre Tech's platform sets up excise, sales tax and withholding in one place and applies them the same way across invoices and finance, so a new levy like FED on naphtha reaches costing and billing correctly. 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. If this affects you, update your costs soon, apply the excise correctly and keep your records ready for a 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.

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