Centre-provinces declaration: Power transmission will be treated as ‘service’ from July 1

ISLAMABAD: The federal government and provinces have declared that the transmission of electricity would be treated as a service from July 1, 2023, for which the Sales Tax Act would be amended through the next Finance Bill.

Sources told Business Recorder here on Wednesday that the decision has been taken during the 6th meeting of the National Tax Council chaired by Federal Minister for Finance and Revenue Senator Mohammad Ishaq Dar.

The consensus has been developed that the power transmission has been declared as a service.

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The NTC decided with the consensus that the Place of Provision of Service Rules will take effect from 1st May 2023 after approval by the respective provincial cabinets. However, the exclusion of electric power transmission from the list of goods by the FBR, for which the Sales Tax Act is required to be amended through the Finance Bill, will take effect from 1st July 2023.

Sources explained that electricity is “good” under international classifications, but the supply of electricity is done through transmission which is a service. For example, independent power producers (IPPs) supply electricity through the National Transmission and Dispatch Company (NTDC). The next Finance Bill will amend the said section of the Sales Tax Act to exclude the transmission of electricity from the list of goods. The FBR has wrongly defined under section 2 (clause 12) that the “goods” included production, transmission and distribution of electricity.

Sources added that as per the decision of the NTC on Wednesday, the transmission of electricity through electrical grids would be excluded from the purview of the goods under the Sales Tax and will be treated as a service.

Minister of State for Finance and Revenue Dr Aisha Ghous Pasha, Engr Zamrak Khan Achakzai, Finance Minister Balochistan, SM Ahsen Tanveer, Minister for Industries Punjab, Himayatullah Khan, Adviser to the CM KP on Finance, SAPM on Revenue Tariq Mahmood Pasha, Special Secretary Finance, Chairman FBR, provincial finance secretaries and other senior officers from the Finance Division and the FBR attended the meeting.

The meeting considered and approved the recommendations of the Executive Committee of the NTC dated 28.03.2023, regarding the draft Place of Provision of Service Rules, which is a major milestone towards GST harmonisation across the country. The approval will help achieve the prior actions for the World Bank-funded RISE programme.

In conclusion, Finance Minister Senator Ishaq Dar appreciated the stakeholders for building consensus and for the settlement of the harmonisation of GST in the country.

Copyright Business Recorder, 2023