Karachi, August 27, 2023 – In a bid to streamline its tax system and encourage responsible energy consumption, the Federal Board of Revenue (FBR) of Pakistan has unveiled revised withholding tax rates on electricity bills for the fiscal year 2023-24.
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Latest Tax Rates for Electricity Consumption in FY 2023-24
Karachi, August 6, 2023 – The Federal Board of Revenue (FBR) has announced the latest tax rates for electricity consumption for the fiscal year 2023-24.
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Electricity withholding tax not applicable on ATL domestic consumers
Domestic consumers of electricity are not subject to withholding income tax if their names are in the Active Taxpayers List (ATL).
The Federal Board of Revenue (FBR) has issued updated withholding tax card 2022-2023 after incorporating amendments made through Finance Act, 2022 to the Income Tax Ordinance, 2001.
READ MORE: Tax rates on goods, passenger transport vehicles during 2022-2023
The FBR collects withholding tax on the electricity consumption under Section 235 of the Income Tax Ordinance, 2001.
Following are the withholding tax rates and text of the Section 235:
WITHHOLDING TAX RATES ON ELECTRICITY
For commercial and industrial consumers:
1. There will be no tax on gross amount of bill up to Rs500
2. The rate of withholding tax shall be Rs10 per cent of the amount where gross amount of bill exceeds Rs500 but does not exceed Rs20,000.
READ MORE: FBR notifies tax rates on brokerage, commission during 2022-2023
3. The tax shall be Rs1950 plus 12 per cent of the amount exceeding Rs20,000 for commercial consumers. Rs1,950 plus 5 per cent of amount exceeding Rs20,000 for industrial consumers where gross amount of bill exceeds Rs20,000.
For domestic consumers: (The tax is applicable on person not appearing on ATL)
The rate of tax to be collected on domestic electricity consumption shall be: (i) zero percent the amount of monthly bill is less than Rs. 25,000; and (ii) 7.5 per cent if the amount of monthly bill is Rs. 25,000 or more.
READ MORE: Non-ATL to pay 200% more tax on motor vehicle purchase during 2022-2023
Section 235. Electricity consumption
(1) There shall be collected advance tax at the rates specified in Division IV of Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial or domestic consumer:
Provided that the provisions of sub-section (1) shall not apply to a domestic consumer of electricity if his name appears on the Active Taxpayers’ List.
(1A) In addition to tax collectible under sub-section (1), there shall be collected tax at the rates given in the Division IV of Part IV of First Schedule from retailers and service providers as provided under section 99A of the Ordinance:
Provided that the tax shall not be collectible under this sub-section if the tax has been collected from the person under sub-section (9) of section 3 of the Sales Tax Act, 1990 as provided in the general order issued under section 99A of the Ordinance.
READ MORE: FBR notifies tax rates on prize bond, lottery winning during 2022-2023
(2) The person preparing electricity consumption bill shall charge advance tax under sub-section (1) in the manner electricity consumption charges are charged.
Explanation.— For removal of doubt, it is clarified that for the purposes of this section electricity consumption bill referred to in sub-section (2) means electricity bill inclusive of sales tax and all incidental charges.
(3) Advance tax under this section shall not be collected from a person who produces a certificate from the Commissioner that his income during tax year is exempt from tax or that he has discharged advance tax liability under section 147 or whose entire income is subject to final tax regime or minimum tax regime under any provisions of this Ordinance other than this section.
READ MORE: Tax rates for rental income from immovable property during 2022-2023
(4) Under this section, —
(a) in the case of a taxpayer other than a company, tax collected upto bill amount of three hundred and sixty thousand Rupees per annum shall be treated as minimum tax on the income of such persons and no refund shall be allowed;
(b) in the case of a taxpayer other than a company, tax collected on monthly bill over and above thirty thousand rupees per month shall be adjustable; and
(c) in the case of a company, tax collected shall be adjustable against tax liability.
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Date extension demanded for electricity bills payment
Karachi Chamber of Commerce and Industry (KCCI) on Monday demanded the authorities to extend the last date for payment of electricity bills across Pakistan as in the ongoing extraordinary situation, neither the business and industrial community nor the poor masses were in a position to pay their bills.
Keeping in view the hardships being faced by the citizens and business and industrial community of Pakistan due to massive flashfloods, KCCI President Muhammad Idrees has appealed Prime Minister Shehbaz Sharif to issue directives for extension of last date for payment of electricity bills for entire Pakistan as in the ongoing extraordinary situation, neither the business and industrial community nor the poor masses were in a position to pay their bills.
READ MORE: Power tariff hike termed disaster for industries
In a letter sent to Prime Minister, President KCCI further requested to refrain DISCOs from charging FAC whereas the controversial Fixed Charges which are neither in favor of the industry nor the economy must also be withdrawn as soon as possible which would be widely welcomed by the entire business & industrial community of Pakistan.
He pointed out that as the entire country is suffering badly because of massive flashfloods triggered by this year’s torrential rainfalls of Monsson Season, the business & industrial community across Pakistan is facing severe liquidity crunch as all the receivables have been pending due to ongoing extraordinary situation wherein the entire Pakistan remains totally sunk.
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“Keeping in view the hardships being faced by the citizens and the business & Industrial community, some leniency would have been exhibited but unfortunately, this was not witnessed at any stage and regardless of taking the ground realities into consideration, electricity tariffs for all DISCOs and KE have been raised by more than 100 percent which are totally unabsorbable for the industries and unaffordable for the poor masses,” he noted.
“Secondly, the issue of exorbitant Fuel Adjustment Charges (FAC) and Fixed Charges also stand unresolved which, we firmly believe, need to be reviewed and withdrawn at the earliest as these are neither in favor of the industries nor the economy,” he added.
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He hoped that Prime Minister would instantly consider KCCI’s request and accordingly instruct relevant Ministry/ departments to provide relief otherwise, many industries, which are already at the verge of collapse, would close down forever which would trigger massive unemployment, chaos and other economic issues.
READ MORE: Pakistan lifts ban on import of cars, phones, luxury items
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Inquiry ordered into collection of increased sales tax ratio
The government on Sunday ordered an inquiry into the collection of sales tax at increased rates from retailers. Prime Minister Muhammad Shehbaz Sharif directed the investigation, focusing on the imposition of a higher sales tax ratio on small traders through electricity bills, which exceeded the agreed-upon rate.
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Tax through electricity bills not taken back: clarification
ISLAMABAD: The federal government on Thursday clarified that the tax through electricity bills has not been taken back so far.
A clarification has been issued through official media of the government of Pakistan that news being released by some media channels that the government has taken back the decision of tax on electricity bills.
READ MORE: Pakistan’s tax agency collects Rs458 billion in July 2022
“It is clarified that there is no authenticity in such news and no decision has so far been taken by the govt. However talks are been held with traders and business community on taxes on electricity bills.”
The power utilities across the country have started collection of sales tax on retailers through the electricity bills for the month of July 2022.
The tax has been imposed on all commercial connections irrespective the nature of work or business at the premises where the electricity meter is installed.
READ MORE: FTO investigates tax collection through electricity bills
Following the issuance of bills for the month of July 2022 a huge resentment was seen from the retailers as well as service providers.
Service providers say that they were not liable to pay sales tax to the federal government as the provincial governments have jurisdiction over it.
READ MORE: Super tax to hammer auto business in Pakistan: Honda Atlas
However, Finance Minister Miftah Ismail recently held talks with business community and retailers to resolve the issue.
The finance minister promised that the issue would be resolved soon. He said that bills below 150 units would not be subject to the tax. The finance minister also assured the business community that other taxes on the electricity bills would also be withdrawn once the issue of fixed tax regime for retailers was settled.
READ MORE: FBR starts filling 502 vacancies in Inland Revenue
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Tax through electricity connections on retailers, service providers
ISLAMABAD: The Federal Boar of Revenue (FBR) has issued explanation to tax collection through electricity connections from retailers and service providers.
In this regard the FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.
The FBR said that in order to collect income tax from certain retailers and specified service providers a special fixed tax regime has been introduced though insertion of section 99A of the Income Tax Ordinance, 2001.
READ MORE: FBR explains income tax on export of services
Now retailers, other than Tier-I retailers as defined in Sales Tax Act, 1990, and specified service providers will pay fixed income tax through their commercial electricity bills which has been provided in clause (3) of Division IV of Part IV of First Schedule to the Ordinance in the following manner:
Where the gross amount of monthly bill does not exceed Rs30,000: the tax rate shall be Rs3,000
Where the gross amount of monthly bill exceeds Rs30,000 but does not exceed Rs50,000: the tax rate shall be Rs 5,000.
READ MORE: FBR restores 100% depreciation deduction
Where the gross amount of monthly bill exceeds Rs50,000 but does not exceed Rs100,000: the tax rate shall Rs.10,000.
Retailers and service providers as notified by the Board in the income tax general order: the tax shall be up to Rs.200,000.
The FBR said that this is final tax on the income of persons covered in this section in respect of business being carried out from the premises for which tax is collected under this section.
READ MORE: FBR notifies graduated tax rates on disposal of securities
Retailers from whom tax has been collected in terms of sub-section (9) of section 3 of Sales Tax Act, 1990 shall not be required to pay tax under section 99A of the Ordinance and the tax collected under the Sales Tax Act, 1990 is also a final discharge of income tax liability under section 99A of the Ordinance.
The Board with the approval of Minister in-charge is empowered to determine the scope, mode, manner, record keeping, mechanism of collection and deduction etc and to include or exempt any person or class of person, any income or class of income though issuance of income tax general order for the purpose of this section.
READ MORE: FBR applies separates CGT rates on immovable properties
Furthermore, enabling provision has been provided by inserting sub-section (1A) in section 235 of the Ordinance to collect tax through electricity bills from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 and specified service providers for the purpose of this section.
The FBR issued another Circular No. 09 of 2022/2023 (Sales Tax, Federal Excise and ICT tax on service). According to this circular, the fixed tax regime for the retailers has been rationalized and now instead of percentage of the amount of monthly electricity bill, tax shall be charged on their monthly electricity bills as; Rs. 3000 for monthly bill upto Rs30,000, Rs5,000 if the monthly bill exceeds Rs30,000 but does not exceed Rs50,000 and Rs10,000 for monthly bill over Rs50,000.
This shall constitute full and final discharge of tax liability of such persons under both Income Tax Ordinance, 2001, and Sales Tax Act, 1990.
However, these tax amounts shall be doubled if the name of the retailer is not appearing on the Active Taxpayers List (ATL) issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill, the FBR added.
In addition to the above, the Board has been empowered to notify through a Sales Tax General Order (STGO) persons or class of persons required to discharge their sales tax liability through payment of a fixed amount along with their monthly electricity bills.
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Fixed tax rates for retailers, payable through electricity bills
ISLAMABAD: The government has announced a fixed tax regime for small retailers, which will be collected their monthly electricity bills.
The fixed tax regime has been proposed through budget 2022/2023, which was announced on June 10, 2022.
Through Finance Bill, 2022 amendment has been made to Income Tax Ordinance, 2001 to propose special provisions relating to payment of tax through electricity connections.
READ MORE: Pakistan amends laws to hunt tax evaders living abroad
Finance Minister Miftah Ismail on the floor of the house while presenting the federal budget said a fixed tax regime for small retailers is being proposed wherein tax will be collected along with electricity bills along with simplified registration and reporting regime.
“The proposed tax will range from Rs.3000 to Rs.10,000 and this will be a final discharge of tax liability. I can reassure the business community that FBR will not probe further after payment of the fixed tax by a retailer,” the minister added.
READ MORE: CGT up to 15% slapped on immovable properties
Through the Finance Bill, 2022 a new Section 99A has been inserted to the Income Tax Ordinance, 2001, which is as follow:
“99A. Special provisions relating to payment of tax through electricity connections.
(1) Notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates provided in clause (2A) of Division IV, Part IV of the First Schedule.
READ MORE: Tax imposed on deemed income from immovable properties
(2) A retailer who has paid sales tax under sub-section (9) of section 3 of Sales Tax Act, 1990 (VII of 1990), shall not be required to pay tax under this section and the sales tax so paid shall constitute discharge of tax liability under this section.
(3) The tax collected or paid under this section shall be final tax on the income of persons covered under this section in respect of business being carried out from the premises where the electricity connection is installed.
(4) For the purposes of this section, Board with the approval of the Minister in-charge may issue an income tax general order to-
(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified.
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(b) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;
(c) provide mechanism of collection, deduction and payment of tax in respect of any person; or
(d) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified.”
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The rate of tax leviable under section (99A), and collectable under sub section (1A) of Section 235 shall be as under:-
Gross amount of monthly bill Tax Where the amount does not exceed Rs. 30,000 Rs. 3000 Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000 Rs. 5000 Where the amount exceeds Rs. 50,000 but doesnot exceed Rs. 100,000 Rs. 10,000 Specified retailers and service providers through Income Tax General Order Rs.50,000 -
Share of domestic electricity consumption declines
ISLAMABAD: The share of electricity consumption by domestic and commercial consumers in the total consumption has declined during first nine months of the current fiscal year, according to Economic Survey of Pakistan 2021/2022.
The share of electricity consumption by household users fell to 47 per cent during July – March 2021/2022 as against the share of 49.1 per cent in the same period of the last fiscal year.
READ MORE: Average inflation estimated up to 12% in FY22
Electricity consumption in the commercial sector has also witnessed a decline and stood at 7 percent in FY2022, down from 7.4 percent in FY2021.
However, the share of Industry in electricity consumption has increased to 28 percent during July-April FY2022 from 26.3 percent during July-April FY2021.
The use of electricity in agriculture sector has slightly increased to 9 percent from 8.9 percent. The share of electricity consumption in other sectors, including public lighting, general services and other government traction has decreased to 8 percent from 8.3 percent.
READ MORE: SBP jacks up policy rate by 6.75% to 13.75%
There is a slight shift in the percentage share of different sources in electricity generation. Thermal has still the largest share in electricity generation in the country, although its percentage contribution has declined from 62.5 percent during Jul-April FY2021 to 60.9 percent during Jul-April FY2022.
READ MORE: Tax to GDP ratio estimated at 10.8% in FY22: Economic Survey
Similarly, the percentage contribution of Hydel in electricity generation has also reduced from 27.8 percent in Jul-April FY2021 to 23.7 percent during Jul-April FY2022.
The percentage share of Nuclear has increased from 7.2 percent during Jul-April FY2021 to 12.35 percent during Jul-April FY2022. The contribution of renewable in the electricity generation has increased from 2.4 percent during Jul-April FY2021 to 3.02 percent in the first ten months of FY2022.
READ MORE: LSM posts 10.4% growth in July – March: Economic Survey
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FBR issues 60,000 notices to Faisalabad industrial, commercial electricity consumers
ISLAMABAD: Federal Board of Revenue (FBR) has issued 60,000 notices to commercial and industrial electricity consumers for mandatory registration and filing of income tax returns.
Syed Shabbar Zaidi in a tweet on Wednesday said that over 60,000 notices to non-registered / non-compliant persons were being jointly sent by FBR and Faisalabad Electric Supply Company (FESCO) to industrial and commercial consumers in Faisalabad.
“Strict actions will be taken against delinquents. Such action will be replicated around the country.”
Under the Income Tax Ordinance 2001, an industrial / commercial consumer of gas or electricity paying above Rs500,000 for single connection is mandatorily required to file income tax returns.
Recently, the chairman wrote letters to power and gas utilities for refusing new applications for commercial / industrial connections until the individuals appear on the active taxpayers list.