Tag: electricity

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 The finance minister also assured the business community that other taxes on the electricity bills would also be withdrawn once the issue of fixed tax regime for retailers was settled.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

August 4, 2022
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.

July 23, 2022

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.

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.

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.

(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.

(b) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;

(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.”

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

June 12, 2022

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

June 10, 2022
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.

September 18, 2019
ICAP suggests reviewing extra tax on electricity, gas consumption by industrial, commercial consumers

KARACHI: Institute of Chartered Accountants of Pakistan (ICAP) has suggested the tax authorities to review imposition of extra sales tax on electricity and gas as this levy is passed unnecessarily to consumers by utility companies.

The ICAP in its tax proposals for budget 2019/2020 submitted to Federal Board of Revenue (FBR) said that in terms of SRO 509(I)/2013 read with Special Procedures thereof, every electric power and gas distribution company / organization supplying electricity or gas to commercial and industrial consumers is required to charge and collect extra tax at 5 percent having monthly bill exceeding Rs15,000/- and which have either not provided their sales tax registration number or not appearing in the Active Taxpayers’ List.

The ICAP said that to make reasonable amendments in SRO 509(I)/2013 considering the practical issues being faced by taxpayers as given below in “rational for change.”

This SRO has posed following questions, as a result of which extra tax is unnecessarily being passed on by utility companies to its consumers:

a) Majority of electricity connections / accounts are maintained in the name of person who possesses the ownership of commercial / industrial property.

Therefore, particulars of the consumers available on sales tax registration certificate / upon FBR portal do not match with the name of the account holders.

b) Banks, Insurance companies, Telecommunication companies, Large Multinational and other similar organizations operate through numerous business locations, manufacturing premises, facilitation offices, distribution & warehouses which, in most cases, are not in the name of such organizations.

Further, sales tax registration particulars on FBR Portal do not reflect all such business places from which business operations are carried out.

If the procedures envisaged in SRO 509 are followed, extra tax would be charged and collected from registered persons in respect of all of their electric connections, which are not in the name of such registered persons.

Furthermore, updation of these particulars (e.g.business locations) on FBR database may take considerable time and Banks, Insurance companies, Telecommunication\ companies, Large Multinational which are already registered for sales tax, will have to bear extra tax of 5 percent on all such electric & gas connection just because they are not updated in their name over FBR Web Portal.

c) Institutions owned by Federal and Provincial governments, defense organization, social sector institution and various other service providers are either not required to obtain sales tax registration number or are registered under Provincial Law.

Hence, they neither possess any sales tax registration number nor are required to obtain any registration under the STA.

However, most of the aforesaid organizations or institutions are commercial consumers and by virtue of the SRO, they are unnecessarily suffering extra tax.

d) Cottage Industry, retailers, hospitals, various agencies, diplomatic missions, privileged persons and organizations have been specifically exempted under the Sixth Schedule to the STA and are not required to obtain registration.

However, most of the aforesaid organizations or institutions are commercial consumers and by virtue of SRO, they are unnecessarily suffering extra tax.

e) Payment of extra tax on accrual basis (bill basis) by utility companies in the backdrop of low recovery ratio / non-payment of electricity bill by government and private institutions poses a great liquidity threat to utility companies.

“Hence, it is recommended that extra tax should be recovered on receipt basis, as it was never a tool for revenue generation but a penal provision to induce registration drive.”

May 20, 2019
Withholding tax rates on electricity consumption for tax year 2019

KARACHI: The electricity supply company shall collect advance tax from industrial and commercial consumer as per updated withholding tax card for tax year 2019 issued after amendments made to Income Tax Ordinance, 2001 through Finance Supplementary (Second Amendment) Act, 2019.

Federal Board of Revenue (FBR) issued following withholding tax rates under Section 235 of Income Tax Ordinance, 2001 to be collected by person preparing electricity bills from commercial and industrial consumers of electricity along with payment of electricity consumption charges:

Does not exceed Rs. 400: Zero tax

Exceeds Rs400 but does not exceed Rs600: Rs80

Exceeds Rs600 but does not exceed Rs800: Rs100

Exceeds Rs800 but does not exceed Rs1000: Rs160

Exceeds Rs1000 but does not exceed Rs1500: Rs300

Exceeds Rs1500 but does not exceed Rs3000: Rs350

Exceeds Rs3000 but does not exceed Rs4500: Rs450

Exceeds Rs4500 but does not exceed Rs6000: Rs500

Exceeds Rs6000 but does not exceed Rs10000: Rs650

Exceeds Rs10000 but does not exceed Rs15000: Rs1000

Exceeds Rs15000 but does not exceed Rs20000: Rs1500

Exceeds Rs20000: (i) At the rate of 12 percent for commercial consumers; (ii) at the rate of 5 percent for industrial consumers.

The tax shall be:

(i) Adjustable In case of company.

(ii) in case of other than company tax collected on Rs, 360000 amount of annual bill will be minimum tax.

(iii) in case other than company tax collected on amount over and above Rs 30000/- of monthly bill will be adjustable.

(iv) Final for CNG Stations.

The withholding tax on domestic consumers of electricity under Section 235A shall be:

(i) If the amount of monthly bill is Rs75,000 or more: 7.5 percent

(ii) If the amount of monthly bill is less than Rs75,000: the tax rate shall be zero.

The withholding tax from every steel melters and composite steel units under Section 235B shall be Re 1 per unit of electricity consumed and the tax shall be non-adjustable.

May 8, 2019
Export sector complains non-compliance by power utilities

KARACHI – The zero-rated textile export sector in Pakistan has raised concerns over the non-compliance of power utility companies in providing subsidized rates, according to a letter addressed to Abdul Razak Dawood, the Adviser to the Prime Minister on Commerce and Textile Industry.
(more…)

February 20, 2019