ISLAMABAD: Peshawar Electric Supply Company (PESCO) has sought help from Power Division against imposition of property tax by the provincial government on federal government assets owned by the power company across by the province.
PESCO is a State-Owned Enterprise and the ownership of its assets are vested in the Federal Government like other Distribution Companies (DISCOs) as per the then Ministry of Water and Power (now Ministry of Energy, Power Division) but despite this fact, tax authorities collecting Urban Immovable Property (UIP) Tax, are not allowing tax exemption to PESCO.
As per Article 165 of the Constitution, provincial taxes like UIP Tax are not applicable on the properties of Federal Government. However, the Peshawar High Court, in its judgement of July 22, 2020 decided that UIP Tax is applicable on PESCO, upheld by the Supreme Court of Pakistan.
Further, various tax demands/ notices have been received from the Excise, Taxation & Narcotics Control (ETNCD) across Khyber Pakhtunkhwa to PESCO to pay UIP Taxes for FY 202 1-22 along with arrears of previous years that is since FY 2006-07; however, these demands are exaggerated and contain numerous discrepancies. The issue has been taken up with the Director General ETNC vide various correspondence and meetings but matter is still unresolved.
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An amount of Rs. 18.60 billion (due to stay on tariff FY 2008-10) and Rs. 2.10 billion is outstanding against the Provincial Government/ associated departments, respectively.
Moreover, despite the fact that the demand of disputed amount of tax being abnormally exaggerated was under consideration between both the departments/ entities, ETNCD in the middle of the reconciliation process has taken coercive measures against PESCO on May 31, 2022 and raided its headquarter in a very aggressive manner and sealed the main offices, as well as, the HBL branch at WAPDA House Peshawar, which has badly hampered the operations of PESCO, affected revenue collections on the last day of the month and created unrest amongst employees who were drawing salaries from the bank branch on payday. This issue has been taken up with the Chief Secretary Govt. of Khyber Pakhtunkhwa on May 31, 2022 for the release of attached properties, which were subsequently released.
CEO PESCO said that in view of court decisions and non-availability of property tax exemption, any action taken by the Cantonment Boards and the Excise, Taxation & Narcotics Control will affect the whole power sector; therefore it is important to address this issue at Ministry level by considering the gravity of the situation.
“A decision/ clarification at the Ministry level should be taken whether payment on account of property tax is to be made or exemption be claimed either by making necessary amendments in prevailing law by referring the matter to ECC/ competent forum or by issuing a clarification stating that all the properties of PESCO are owned by Federal Government and are exempted from property tax as is PESCO being a Federal Government, instrumentality, having 100% government shareholding,” he added.
CEO has maintained that in order to save the company, as well as, its consumers from additional financial burden, CEO PESCO has sent following proposals to Power Division: (i) initially a clarification be issued that ownership of all the assets of PESCO, being a public utility company, rests with the Federal Government, so that the matter may be contested at the appropriate forum for exemption from property tax; and (ii) the matter be placed before the ECC/ competent forum for granting exemption from property tax to PESCO, as well as, other DISCOs owned by the Federal Government, or (iii) a clarification be issued regarding the payment of property tax to the Excise Department and the Cantonment Boards or otherwise, as it may have an effect (tax consequences) on the whole power sector.
Copyright Business Recorder, 2022
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