ISLAMABAD: The Federal Board of Revenue (FBR) has announced revised withholding tax rates for electricity consumption by both commercial and domestic consumers, effective from July 1, 2021. These updates, implemented under Section 235 of the Income Tax Ordinance, 2001, were introduced through the Finance Act, 2021.
Updated Withholding Tax Rates for 2021/2022
Commercial and Industrial Consumers
The updated withholding tax rates for commercial and industrial electricity consumers are structured as follows:
1. Bill Amount up to Rs500: The withholding tax rate is zero for both commercial and industrial consumers.
2. Bill Amount Exceeding Rs500 but Not Exceeding Rs20,000: The tax rate is set at 10% of the total bill amount.
3. Bill Amount Exceeding Rs20,000:
o For commercial consumers, the tax rate is Rs1950 plus 12% of the amount exceeding Rs20,000.
o For industrial consumers, the tax rate is Rs1950 plus 5% of the amount exceeding Rs20,000.
These rates apply to the gross amount of electricity bills and are to be collected by the entities preparing and issuing these bills.
Domestic Consumers Not on the Active Taxpayers List (ATL)
For domestic consumers not listed on the ATL, the withholding tax rates are:
1. Monthly Bill Less than Rs25,000: The tax rate is zero.
2. Monthly Bill of Rs25,000 or More: A tax rate of 7.5% of the total bill amount is applicable.
Tax Adjustability and Minimum Tax
The FBR has outlined the following provisions regarding the collected/deducted withholding tax:
1. Adjustable Tax for Companies: The tax collected from companies is adjustable against their total tax liability.
2. Minimum Tax for Non-Company Entities:
o For non-company entities, the tax collected on an annual bill amounting to Rs360,000 will be treated as minimum tax.
o For monthly bills exceeding Rs30,000, any tax collected above this threshold will be adjustable.
Special Provisions for CNG Stations
The FBR also specified minimum tax rates for CNG stations under Section 234A. However, the detailed rates and structures for CNG stations were not provided in the announcement.
Implementation and Compliance
These updated rates reflect the FBR’s ongoing efforts to streamline tax collection and enhance compliance within the electricity consumption sector. By adjusting the withholding tax rates, the FBR aims to balance revenue generation with the financial capacities of different consumer categories.
Conclusion
The new withholding tax rates are designed to ensure fair tax collection across various consumer segments, promoting a more efficient and equitable tax system. Commercial, industrial, and domestic consumers should review their electricity bills and tax statuses to understand the implications of these changes.