FBR allows tax refund deducted through electricity bills

FBR allows tax refund deducted through electricity bills

KARACHI: The Federal Board of Revenue (FBR) has allowed tax refund deducted through electricity bills, sources said on Thursday.

The sources said that electricity supply companies had started adjusting the amount deducted as sales tax on monthly bills of commercial connection holders.

READ MORE: Pakistan decides to roll back fixed tax scheme

In this regard the FBR circulated the recent decision of a committee regarding fixed tax regime for retailers.

Sources in K-Electric, the power producing and supply company mainly for residents of Karachi, said that the utility was adjusting the electricity bills of those consumers who have days for due date in payment of electricity charges.

Furthermore, those who had paid their bills along with sales tax will be adjusted in the next bill, the sources added.

The power companies are making adjustment against the paid amount on the directives of the FBR, the sources further added.

READ MORE: FTO investigates tax collection through electricity bills

In order to review the fixed tax regime a meeting was held on August 04, 2022 at the ministry of finance to finalize the collection of sales tax through electricity bills.

The meeting was presided over by Finance Minister Dr. Miftah Ismail. The meeting decided that the fixed tax scheme introduced through Finance Act, 2022 would be rolled back ab initio and the retailers would continue to pay taxes as per previous (pre-budget) mechanism and rates.

The meeting decided that for the next three months i.e. July to September 2022, the previous tax rates would continue to apply on retailers.

It was decided that the government would review the situation and would notify new tax rates effective from October 01, 2022.

For reversal of fixed tax scheme, necessary legislation would be enacted by the FBR as soon as possible.

The fixed tax rate was implemented and the FBR started collection through electricity bills effective from July 01, 2022. The power utility on the behalf of the FBR applied the fixed tax on all the commercial connections irrespective of nature of business, including service providers.

The illogical application of fixed tax regime invited huge and cry from the several quarters, which forced the government to review its decision.

READ MORE: Withdrawal of sales tax through electricity bills demanded

Recently, the Federal Tax Ombudsman (FTO) launched investigation in a complaint received regarding sales tax collection through electricity bills.

The FTO on July 29, 2022 issued notices to Secretary, Revenue Division, Chief Commissioner and Commissioner Inland Revenue Large Taxpayers Office (LTO) Karachi, in the complaint filed by Mrs. Fauzia Salman against illegal and unlawful collection of taxes through electricity bills by K-Electric Limited.

READ MORE: Tax through electricity connections on retailers, service providers

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