KARACHI: Despite being victimized by dilapidated road infrastructure, high air pollution, gas shortage, ever-increasing street crime, unemployment, etc, Karachi is the only city where the Federal Board of Revenue (FBR) is collecting double income tax on electricity bills.
The Karachiites, who are the highest taxpaying citizens with lesser fundamental rights, are now being forced to pay double income tax on electricity bills at their businesses and residential areas.
The issue came to the surface when the field formations of the FBR issued notices to shopping malls and amusement parks in Karachi, whereby they were asked to collect income tax on the electricity bills under section 235 of the Ordinance.
Similarly, there are several gated residential societies in the district West where the developers got bulk electricity connections and distributed power to the inhabitants of the communities against highly taxed reimbursement notes, raising transparency issues.
The inhabitants of these societies are reportedly paying over Rs50-60 per unit against the electricity being supplied by the developers through bulk connections. However, it is the sole responsibility of the licensed person making the bill for power consumption not of the developers of the societies.
On the other hand, the provisions of section 235 of the Ordinance stated that there shall be collected advance tax at the rates specified in Division IV of Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial, or domestic consumer: Provided that the provisions of sub-section (1) shall not apply to a domestic consumer of electricity if his name appears on the Active Taxpayers’ List.
(1A) In addition to tax collectible under sub-section (1), there shall be collected tax at the rates given in Division IV of Part IV of First Schedule from retailers and service providers as provided under section 99A of the Ordinance: Provided that the tax shall not be collectible under this sub-section if the tax has been collected from the person under sub-section (9) of section 3 of the Sales Tax Act, 1990 as provided in the general order issued under section 99A of the Ordinance
(2) The person preparing the electricity consumption bill shall charge advance tax under sub-section (1) in the manner electricity consumption charges are charged.
It clearly suggests that the person preparing the electricity consumption bill shall collect advance tax on the amount of electricity bill of either a commercial, industrial or domestic consumption and, therefore, once the power company like KE has done the collection of tax on its bills, it cannot be further collected by the second and the third persons be it shopping malls, developers or parks.
Karachi Tax Bar Association (KTBA) has confirmed that field formations in Karachi have issued notices and asked them to collect income tax on the electricity bills under section 235 of the Ordinance.
The malls and developers, on the other hand, provide space for commercial and residential purposes but do not sell electricity to them and only install sub-meter for them and that too with the permission of KE to measure the units of consumed electricity, KTBA said.
KTBA said that the malls, developers, and parks were not engaged in the business of supply of electricity as it was not their business to supply electricity nor did they have the necessary permission (license) from Nepra under the Electric Power Act, 1997 for Generation, Transmission, and Distribution of electricity.
Furthermore, KTBA requested the chairman FBR to issue a clarification that these places are not required to collect income tax under section 235 of the Ordinance while issuing reimbursement notes for collecting the amount of electricity consumed by them, provided to them either through K-electric supply or through own back-up generators as they are neither engaged in the business of supplying electricity nor do they have any license from Nepra to do so.
It is bound to secure the amount through reimbursement note owing to the fact that KE has not installed separate meters and already charged income tax under section 235 of the Ordinance.
Copyright Business Recorder, 2023