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.
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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.
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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.
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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.
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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.
