SPL seeks CPPA-G support for release of pending sales tax refund

ISLAMABAD: Saif Power Company Limited (SPL), which owns a 225MW power plant, has sought support from Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) for the release of its pending sales tax refund from the Federal Board of Revenue (FBR).

In a letter to the Chief Executive Officer of CPPA-G, the Chief Financial Officer of SPL referred to the Power Purchase Agreement (PPA) dated April 30, 2007, and the Master Agreement (MA) of February 11, 2021, signed between the company and CPPA-G, the power purchaser, as novated through a Novation Agreement involving National Transmission and Despatch Company.

According to the company, its financial position has significantly deteriorated following the amendment agreement signed on February 28, 2025, particularly due to the one-time waiver of delay payment interest amounting to Rs1.36 billion. The company stated that it is currently incurring losses, as reflected in its latest financial statements, and financial institutions and banks are now reluctant to extend working capital facilities.

Citing Clause 3 of the Master Agreement, SPL noted that the power purchaser is obligated to assist and support the company in resolving tax-related issues with the FBR, including matters related to sales tax on High-Speed Diesel (HSD), apportionment of input tax on Capacity Purchase Price invoices, minimum tax, and the taxability of late payment charges.

SPL maintained that its sales tax refunds have remained pending for a prolonged period, adding that it has not received any refund from the FBR since 2010, leading to a substantial accumulation.

The company further stated that during renegotiations in 2024 and 2025, it, along with other Independent Power Producers (IPPs), offered discounts in the larger national interest, estimated at around Rs1.2 billion per annum over the project life until 2040. In return, the government, through CPPA-G and the Private Power and Infrastructure Board, assured facilitation for timely processing of sales tax refunds to help meet operational requirements.

Subsequently, SPL applied for a sales tax refund amounting to Rs460 million in July 2025; however, no action has been taken so far despite repeated reminders to the tax authority.

With summer approaching and an expected increase in power generation demand from CPPA-G and NTDC, the company warned that its deteriorating cash flow position could impact operations. It urged CPPA-G to facilitate the early release of the pending sales tax refunds.

Copyright Business Recorder, 2026