K-E asks FBR to remove tax return difficulties

K-Electric Limited [the company] has asked the Federal Board of Revenue (FBR) to remove difficulties of companies engaged in generation, transmission and distribution of electricity in filing of (Annexure C) monthly sales tax returns with the FBR.
Sources told Business Recorder here on Saturday FBR had received a letter of the said company through its legal firm/chartered accountant about the practical difficulties which were attributable to declaration of its consumers at Annexure-C of Sales Tax Returns filed with FBR.
The company is engaged in generation, transmission and distribution of electricity in Karachi and adjacent licensed area to its 2.4 millions of customers who largely fall in three categories, i.e. residential, industrial and commercial. The last two categories i.e. industrial and commercial include consumers which are registered under Sales Tax Act, 1990 [ST Act] and claim input tax on electricity bills issued by the company. The company on the basis of its database generates electricity bills to these customers. Amongst these sales tax registered consumers, there are most of the consumers who have not yet updated their National Tax Numbers (NTNs) in company''''s database which is pre-requisite for declaring sales and related output tax in Annexure-C of the of the sales tax return form in respect of registered consumers, it said.
The sales tax charged against the bill issued to consumers whose NTNs was not updated in the company''''s database was clubbed and declared as one line item in Annexure C as sales to "bulk unregistered persons," it said. The Federal Government vide SRO 493(I)/2016 dated 01 July 2016 [SRO 493] has changed the mechanism for filling of on-line sales tax return. Through the new mechanism as envisaged in SRO 493, the suppliers of the goods are required to declare the output tax in Annexure-C of the sales tax return. The output tax so reported by the supplier is available in Annexure-A of the respective buyer for the claim of input tax. Only such input tax can be claimed which has been declared by the supplier.
It is not humanly possible for the company to entertain their request, especially in last dates of filing of return. The timeline i.e. 10th of following month for filing of Annexure-C under the above scenario is unrealistic for the company which has more than 2.4 million consumers. The company understands that the similar issue was also being faced by the other DISCOs across all over Pakistan and the consumers were being deprived of their legitimate input tax. The Lahore Tax Bar Association has also raised the similar issue vide its letter dated October 24, 2016.
The company appreciates and welcomes the new mechanism of online cross verification of input/output tax between the supplier and buyer for claim of input tax. At the same time, the company states that updating and verifying of thousands of consumers in the database of the company cannot be done in a few days. Due to non-updation of NTN of the customers in company''''s database and the reporting of the sales tax so charged in the bulk unregistered category has resulted in mismatch of sales tax reported by the company and that claimed by its consumers. In past, the company had been issued numerous notices by tax department whereby it was alleged for short payment of sales tax based on the input tax claimed by the buyers and related output tax was declared in the category of "bulk unregistered" at Annexure C of sales tax returns filed by the company.
Keeping view of the above practical limitations, the company has requested the FBR to extend the date of filing of monthly sales tax return and deposit of tax as per details: Date for filing of Annexure C, 20th of following tax period, date for deposit of tax, 28th of the following month and date for submission of return, 28th of the following month.
The FBR would appreciate that the gas supplying companies have already been given to file sales tax return by 25th day of second month following the tax period from 23 November 2016 enabling them to make proper compliance of the law, it added.