FBR suspends KE’s sales tax registration

ISLAMABAD: The Federal Board of Revenue (FBR) has suspended the sales tax registration of K-Electric with effect from May 20, 2026, according to the online taxpayer registration status available on the FBR’s web portal.

KE spokesperson in response to the query said: “We have already engaged with the FBR on this matter, and we have been assured that the system will be restored to normal”

However, the income tax status of the taxpayer (K-Electric) is “Active” as per FBR website.

Legal and tax experts have expressed serious concern over the move, warning that the suspension could create significant difficulties for industrial, commercial, and domestic consumers relying on input tax adjustments against electricity bills.

Prominent Karachi-based sales tax expert and Advocate Supreme Court, Arshad Shehzad, explained that the powers relating to suspension and blacklisting of sales tax registrations are provided under Section 21(2) of the Sales Tax Act, 1990.

According to Shehzad, these provisions were originally introduced as extraordinary measures to tackle fraudulent and bogus taxpayers who misuse the sales tax system to generate fake input tax credits.

“These powers were designed for extreme situations involving fraudulent entities that obtain sales tax registration solely to abuse the input-output adjustment mechanism,” he stated.

He termed the suspension of a major utility company like K-Electric as shocking, arguing that large-scale taxpayers with substantial infrastructure, investment, and operational presence cannot disappear overnight from the tax system.

“Unfortunately, tax authorities are increasingly using these extreme powers against genuine and prominent taxpayers. The suspension of K-Electric’s sales tax registration appears to be a classic example,” Shehzad observed.

Discussing the implications of the suspension, he warned that millions of consumers — including industrial units and commercial entities — may be unable to claim input tax adjustments on sales tax charged through electricity bills in their sales tax returns.

He further noted that taxpayers seeking refunds based on K-Electric bills could also face difficulties in claiming legitimate tax credits, despite having paid their electricity bills in full. “This could become a major setback for consumers, who may end up paying additional sales tax liabilities due to the unavailability of legitimate input tax credits. In practical terms, consumers may suffer even more than K-Electric itself,” he said.

Clarifying the legal distinction, Shehzad explained that companies may become “non-active” in cases of delayed or non-filing of returns. However, suspension of registration is a separate legal action that requires a formal order from the concerned Commissioner, against which an appeal must be filed before the Inland Revenue Tribunal.

“Suspending the sales tax registration of genuine taxpayers merely for tax recovery purposes under the garb of Section 21 should be stopped. Such actions can negatively impact industrial growth, exports, and overall business activity,” leading sales tax expert concluded.

Copyright Business Recorder, 2026