KARACHI: Federal Board of Revenue (FBR) has withdrawn sales tax zero rating on supply of electricity to two textile units on misuse of tax concession facility.
In a move aimed at curbing the misuse of tax concessions, the FBR has decided to withdraw the sales tax zero-rating on the supply of electricity to two textile units, Mohammad Ashraf and Sons and Sadaf Enterprises. The decision, which was conveyed through an official notification issued on Friday, has stirred conversations in the business community and tax circles.
The FBR’s decision to suspend the sales tax zero-rating facility came on the recommendations of the Corporate Regional Tax Office (CRTO) and Regional Tax Office-III (RTO-III) in Karachi. This move is part of the government’s efforts to ensure that tax concessions are granted to deserving beneficiaries and that there is no misuse of the facility.
The decision further directs the chief commissioners of CRTO and RTO-III in Karachi to work in coordination with K-Electric, the local power utility company, to implement normal rates for the supply of electricity to the textile units. It is essential to ensure that the units are no longer exempt from the standard sales tax rates.
Furthermore, the FBR has instructed the chief commissioners to initiate necessary actions for the recovery of any misused benefits. This means that any tax concessions granted improperly or incorrectly will be subject to scrutiny, and the beneficiaries will be held accountable for the misuse of the facility.
To implement this decision effectively, the FBR has also communicated with M/s. K-Electric, directing them to begin charging sales tax on the supply of electricity to the textile units mentioned above, with immediate effect. This ensures that the tax rate is adjusted in accordance with the revised policy and that the affected textile units will now be subject to the standard sales tax rates.
The zero-rated facility, which was initially permitted under SRO 1125(I)/2011 dated December 12, 2011, aimed to support the textile industry by reducing the cost of production and enhancing exports. However, misuse of such tax concessions can lead to a significant loss of government revenue, and as such, the FBR is committed to rectify such instances.
This move by the FBR is in line with the government’s broader efforts to streamline and optimize the tax system in Pakistan. By ensuring that tax concessions are granted correctly and that misuse is prevented, the government aims to create a more equitable and efficient tax regime. Such measures not only contribute to enhancing tax compliance but also help bolster the country’s economic stability.
The decision has sparked discussions in the business community, as it emphasizes the government’s commitment to transparency and accountability in the taxation system. While tax concessions play a crucial role in supporting various industries, it is imperative that these facilities are availed responsibly and do not result in revenue loss for the government.
The FBR’s move to withdraw the sales tax zero-rating on electricity supply to the two textile units underscores the importance of adhering to tax regulations and ensuring that tax concessions are used as intended. This decision is a part of the ongoing efforts to strike a balance between supporting economic growth and safeguarding government revenues.
