Sales Tax Act Grants FBR Authority to Disconnect Electricity and Gas for Defaulting Retailers

Sales Tax Act Grants FBR Authority to Disconnect Electricity and Gas for Defaulting Retailers

Islamabad, November 15, 2023 – The Sales Tax Act of 1990 has conferred the authority upon the Federal Board of Revenue (FBR) to discontinue electricity and gas connections for retailers found in default of their tax obligations.

Section 14AB of the Sales Tax Act, recently updated for the tax year 2024, outlines the specific provisions empowering the FBR to take such actions.

The updated Sales Tax Act grants the FBR the power to issue directives, through Sales Tax General Order, to gas and electricity distribution companies, ordering the discontinuation of services to certain individuals falling within specified categories. According to the provisions:

(a) Non-registered Persons: The FBR can direct the discontinuation of gas and electricity connections for any person, including tier-1 retailers, who fail to register for sales tax purposes.

(b) Registered but Unintegrated Retailers: Notified tier-1 retailers who are registered but have not integrated with the Board’s Computerized System can also face discontinuation of gas and electricity connections.

The provision includes a proviso that states, upon the subsequent registration or integration, the FBR will issue a notification through Sales Tax General Order for the restoration of gas or electricity connections.

This move is part of the government’s efforts to enhance tax compliance and discourage tax evasion, particularly in the retail sector. By empowering the FBR to disconnect essential utilities, the government aims to create a strong deterrent against non-compliance with sales tax regulations.

The FBR has been actively working to streamline tax administration and ensure that businesses, especially retailers, fulfill their tax obligations promptly. The integration of retailers with the Board’s Computerized System is seen as a crucial step in this direction, allowing for better monitoring and enforcement of tax regulations.

While the new provision gives the FBR additional tools to enforce tax compliance, there are concerns about potential misuse or arbitrary use of this power. Critics argue that safeguards must be in place to ensure fair and just application of these measures, protecting businesses from unwarranted disruptions.

The business community is closely monitoring how the FBR implements this new authority and how it balances the need for tax compliance with the protection of businesses’ interests. As the FBR exercises its powers under the updated Sales Tax Act, stakeholders will be keenly observing the impact on tax collections and the overall business environment.

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