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ISLAMABAD: National Transmission and Despatch Company (NTDC) has sought support from the Power Division to restore sales tax exemption on import of power transmission and grid station items at the import stage, as the imposition of tax will result in cash issues.

NTDC is a public limited company and is an instrumentality of the Federal Government (MoE-Power Division). The principal activity of the company is the transmission of electric power to power Distribution Companies (Discos).

Being an infrastructure development-based company, NTDC is required to incur capital expenditure (CapEx) for the development of new and maintenance and improvement of existing transmission infrastructure at the national level.

Chief Financial Officer (CFO), NTDC, Khawaja Asif Kaleem, in a letter to Power Division, informed the Board of Directors (BoD) of the NTDC that recently a budget was approved for CapEx of around Rs. 414 billion for the remaining period of the running &upcoming three financial years. A substantial part of the CapEx is incurred on the import of transmission machinery and grid station items. Whereas, NTDC secures finance from local and foreign financial institutions to meet this huge expenditure and hence bears its financial cost.

FCA for Jan 2022: Nepra allows passing the additional burden of Rs50bn on to Discos’ consumers

According to CFO, NTDC has been availing Sales Tax exemption on import of machinery and equipment meant for power transmission and grid stations whereas the Finance (Supplementary) Act, 2022 has omitted the available exemption.

NTDC maintains that omission of exemption will result in cash flow of the funds between the two entities wholly owned by the federal government, whereas, it becomes revenue of one government department and cost to another - NTDC - that includes the financial cost of securing the funds, and cash flows of NTDC may be stuck in the shape of Sales Tax refunds.

NTDC has requested Power Division to approach the Ministry of Finance for the restoration of the Sales Tax exemption, so that the available funds may be utilized on the establishment and improvement of electricity transmission infrastructure.

Some Chinese companies working on different hydropower projects have also approached Private Power & Infrastructure Board (PPIB) and CPEC Authority requesting for reversal of tax exemptions that were offered under different power policies.

Copyright Business Recorder, 2022

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